As the saying goes, if you want to know what someone is made of, watch how they handle a few simple situations. Did they blink when the going got tough? Did they buckle under pressure? Did they draw on past experiences to deal with the situation at hand? These are all indicators that tell you a lot about someone… and their financial stability. New homeowners can be a risky bunch, too. After all, there’s a lot to take in and remember. For those who’ve just signed the deed, it can be easy to make costly mistakes. But, the good news is that the sooner these are spotted, the faster the negatives can be ironed out, and the sooner the young family can settle into their new home. So, read on to discover ten financial pitfalls new homeowners fall into, and how to avoid them.
Don’t get a mortgage before you know the financial basics
It’s easy to get excited about the idea of owning a new home, but it’s important to remember that purchasing a home is a long-term commitment. Only when you know the ins and outs of the process can you make the right decisions. If you get the mortgage wrong, it can take years to get it sorted out. Shocking, right? Before you sign on the dotted line, make sure you’ve got all the basics right. Know how much you can afford. Understand your mortgage repayments. Know why you’re getting a mortgage.
Put too many eggs in one basket
This is a common mistake among first-time homebuyers. You’re excited at the prospect of owning your own home, but you also want to start saving immediately. So, you put an extra 10% of your salary into your savings account. This is a good idea. But, you end up saving all your extra money into that one account. You might even choose to transfer your savings from a high-interest savings account to a low-interest account, so you pay less interest over time. However, this means you have less money to put into your mortgage, or you could put all your eggs into one basket. Yes, it’s a good idea to have a small savings account, but don’t put them all into one basket.
Don’t pay your mortgage off as quickly as you can
Like any debt, a financial debt like your mortgage has a repayment schedule. This means that, over time, you’ll have to pay off your loan. If you pay the loan off too quickly, you could end up paying more than you would if you wait a few years to pay it off. However, this doesn’t mean you should hold onto it for as long as possible and pretend it doesn’t exist. You should pay off your loan as quickly as you can in order to get a lower interest rate, but don’t pay the loan off in full.
Paying too much for home improvements
Homeownership is a responsibility. This means that, when you get the call from the handyman/woman, it’s time to pay up. However, if you’re paying a little more than you should be paying, then this is a financial blunder, too. It’s a good idea to get a home inspection. This will warn you of any expensive improvements the homeowner has made to the property. But, if you act quickly, you can either get the work done cheaper, or stop the work, and save money. If you must have that new kitchen or bathroom, do what you can to get it done for a cheaper price.
Financing too much debt – too quickly
When it comes to getting a mortgage, there are two types of lenders. There are the banks, building societies, and credit unions that have the power to grant you a mortgage, and then there are the providers of home loans. These providers might be a credit card company, a loan broker, or a high street bank. Choosing the wrong one can lead to a costly mistake. The wrong lender is a costly mistake. It can lead to costly fees and interest rate increases, as well as a lack of protection. So, make sure you get your mortgage from the right lender.
Buy the wrong type of property
A classic rookie mistake. A home is a home, right? Wrong. If you’re a first-time homeowner, it’s important to get the right type of property. There are different types of properties available. You can get shared ownership or a buy-to-let property. The first two are shared between multiple people, while the third is a profitable investment. This means you can make money when you sell the property, too.
Investing too conservatively
There are thousands of ways to invest money. However, when it comes to homeownership, there are a few ways that are best avoided. When it comes to housing, there are only three safe investments. Homeownership. A savings account. And, a government bond. You can get home loans from most banks and building societies, but they’re far from the safest type of investment. So, don’t mortgage your future by taking out a home loan that comes with high-interest rates.
Summing up
New homeowners can be a risky bunch. After all, there’s a lot to take in and remember. For those who’ve just signed the deed, it can be easy to make costly mistakes. But, the good news is that the sooner these are spotted, the faster the negatives can be ironed out, and the sooner the young family can settle into their new home. So, read on to discover ten financial pitfalls new homeowners fall into, and how to avoid them.
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