1. No research and choosing opinion over expertise
It is very important to not be too influenced by what you hear from family and friends, who may be in a completely different financial or lifestyle situation to you.

Going direct to your current lender for your new property loan and not researching loans offered by other lending institutions may seriously disadvantage you. We are living in an increasingly competitive mortgage landscape that sees new products and new lenders becoming available every day.

Can you guarantee your current lender will provide the loan arrangement that best suits you? You had better be sure because you will be paying it off for quite a few years!

You may feel a certain loyalty to your current lender but this should not distract you from finding the most suitable property loan for you and your circumstances.

2. Making decisions based on honeymoon rates and giveaway offers
Don’t make you decision based on a honeymoon (introductory) interest rate because you will be paying the ‘normal’ interest rate before you know it. A 0.5 percent discount on the interest rate for the first year or so will only benefit you in the short term and may end up making you much worse off over the long term.

It is a good idea to pay at the ‘normal’ rate from day 1. This way you will be prepared for the end of the honeymoon period and you will have paid off more off your loan!

Also, when deciding between variable, fixed or split rate, remember that just because the rate is the cheapest in the market doesn’t mean that loan will end up the cheapest in the long run. We all know a variable loan’s interest rate changes over time and a fixed loan’s rate has a limited timespan.

Another short-sighted mistake is to take giveaway offers, such as petrol or holidays, into consideration. For example, that higher interest rate on a giveaway offer loan will soon outweigh the benefit of the year-long discount on fuel that was offered.

3. Not thoroughly considering the loan features you need
Upon deep consideration, you may be surprised to find that you need more loan features that you first realised. If the loan you choose does not have the facilities you need, e.g. allowing you to redraw on any money you have paid over and above your regular repayments, then you may be sorely disappointed.

Features to consider are:

4. Ignoring associated fees and costs
Although it may be tempting to let your judgment be overshadowed by the standalone interest rate you should consider other fees such as application, deferred establishment, rate lock, monthly, break, switch and redraw.

Comparison rates are often of assistance when looking at different loans’ overall ‘true cost’. Each loan’s comparison rate includes the interest rate plus fees and charges relating to it, reduced to a single percentage figure so you can easily compare.
However, note that different amounts and terms will result in different comparison rates. Costs such as redraw or early repayment fees and cost savings such as fee waivers are not included but obviously may influence the cost of the loan, as will the changeable nature of variable interest rate loans.

5. Stretching yourself to the limit with repayments
Although a lender may have approved the loan amount and term you applied for, you really need to make sure you can make those monthly repayments fairly comfortably for at least the next few years (when you may think about refinancing).

If you haven’t done so already, create a budget that lists every cost you incur over the year and break down those costs as per the timeframe of your expected loan repayments, which will usually be fortnightly or monthly. Include everything from vehicle maintenance to haircuts to magazines and morning coffees.

You might be surprised at how much you actually spend over each period and how much you really have to put towards a mortgage.

6. Not factoring in interest rate rises
Every savvy borrower factors in at least a 0.25 percent interest rate rise because mortgage interest rates increase and decrease at times over the lifetime of the loan. You don’t want to get caught out by not budgeting for those rises! ‘Factoring in’ might mean you pay that little bit extra from the time you start repaying or you already have it in your budget for when a rise occurs.

If you can factor in even more than 0.25 percent that will really help in the long run. Any extra money you put into your mortgage will reduce the amount owing and should also reduce your eventual loan term.

Even if you are paying off a fixed rate loan, that fixed term will eventually end so why not pay a little extra if you can afford to and the loan allows it. You will be grateful you have done so.

7. Thinking property investment is a short term strategy
Property investment is an exciting and life-changing decision that can set you in good stead financially, given the right choices and commitment to its long-term nature.

A reliable short-term investment strategy is difficult to achieve for the average person. Sensible borrowers should consider property investment as a long-term strategy especially now house price growth is at a much slower pace in most states. Over the long term, there are many regions of Australia where good gains can be made if the buyer researches the area well and identifies the strengths and weaknesses involved.

Investors should be aware that to gain a healthy profit they should think at least five to 10 years ahead before considering selling it, whether it is a home or purely an investment.

Many investors looking for capital gain prefer long term interest only loan products such as lines of credit with split facilities, particularly where there is still some owner occupied debt to be repaid. This gives them flexibility and breathing space to afford managing loans on two or more properties.