Loan blunders come at a cost

MORTGAGE costs have never been cheaper and they are likely to stay this way for a while.

For those saddled with debt, this means you can smash down your loan at a record pace without being worried about your borrowing costs climbing.

But there’s some common mistakes I see borrowers repeatedly making with their loans that usually end up with them paying too much. 1. Sticking with the Big Four

I’m not here to bash the big four banks … but … sticking with a big bank “just because” doesn’t fly with me.

About 80 per cent of mortgage customers have a loan with the largest lenders and the big guys know they can get away with murder.

They don’t have to pass on the full rate cut when the RBA drops the cash rate, they can charge a premium and they know it’s often in the too-hard basket for customers to bother switching to another lender.

But you should consider the smaller lenders.

My home loans are not with the big four banks and I’m getting better deals than most of my mates who do their banking with the largest lenders. 2. Not doing any research

If you are clueless about what is a good or bad deal, you are more than likely going to get rolled.

It’s pretty easy to hunt around online and see what other deals lenders are offering. Usually all you need to know is your loan size, loan-to-value ratio and length of your loan to spit out online what deals any bank will offer you.

Be sure to do this before signing the dotted line on any mortgage documents. 3. Failing to understand your loan

Believe it or not, some borrowers are clueless when it comes to knowing the simplicities of their loan.

This includes having a principal and interest or interest-only loan, an offset account or even being on a fixed or variable deal. If you are unclear, phone your bank and ask questions.

Don’t be embarrassed — they don’t know you. You’re just a number to them.

But educate yourself, because no one cares more about your loan than you do.

You need to have a basic understanding of it because, if you don’t, there’s a good chance you are on a dud deal and won’t even realise. 4. Taking advice from a broker/banker as gospel

While bankers and brokers claim they are not giving you financial advice when it comes to your loan, they can steer you in one direction or another.

Take whatever they say with a big fat grain of salt.

One borrower the other day told me he didn’t know whether to fix his home loan or not and after speaking with his bank they told him he should. So he did!

Of course they would do this. They want him locked in as a customer so he won’t take his business elsewhere. Sophie Elsworth is a personal finance writer at News Corp.