Why is my Mortgage Interest Rate so High?
The thing about mortgage interest rates is that everyone gets a personalised interest rate based on many factors. Getting a mortgage is a big responsibility and a lot of money. Australian banks and lending companies want to feel protected and know that they will get their money back. This is why they have high requirements for low-interest rates. People with high-interest rates are typically at risk for not paying their monthly or fortnightly mortgage based on factors.
Low Credit Score
Bankers and lending companies frown when they see low credit scores. Although a low credit score can still get you a mortgage, it is significantly harder, and your interest rate may be high. If you notice that the interest rate your lenders offer is high, it could be because you have a low credit score.
This either means that you have missed payments or have a new account with limited information. It takes time to build a strong credit score.
Too Many Debts
When lending companies and bankers see too many revolving debts, it is a red flag, and they may offer you a high-interest rate. When there is a lot of debt, it tells lenders and bankers that you do not have enough money to pay off your debt. A mortgage will only put you in more debt. Having too many debts, like credit cards or car loans, can also decrease your credit score. These factors are connected.
Lack of Bank Statements
If you do not provide bank statements, this may draw another red flag to loaners and bankers. Bank statements can show what you have in each account exactly and your spending. Not providing it can hurt your chances of a lower interest rate.
Having a high-interest rate can increase the cost of your monthly mortgage! It also means that your interest continues to increase, meaning you spend a lot of money! Sometimes, interest rates are so high that you can end up paying more than the original borrowed amount.
Most of the time, you have a high mortgage interest rate because you also have a high-interest rate, too many debts, or a lack of reliable bank statements.