Mortgage Mistakes: How to Avoid Overpayments and Problems with the Bank

Learn what to pay attention to when applying for a mortgage to avoid overpaying, facing financial difficulties, or having problems with the bank. In this article, we’ll go over what not to do at the loan application stage and how to protect yourself so that repayment doesn’t become a problem.

1. Agreeing to the Bank’s First Offer and Not Researching the Real Estate Market

Buying real estate is a serious financial investment, and taking out a mortgage means entering a long-term relationship with a bank. That’s why it’s important not to make impulsive or poorly thought-out decisions.

Don’t fall for marketing tricks such as: “The promotion ends today,” “Hurry up — prices go up tomorrow,” “It’s the last apartment available,” or “You’re our payroll client, so you get the best deal.” These statements are meant to pressure you into acting quickly.

If you rush, you might later discover that other banks could have offered you a lower rate and a higher loan limit, or that a new residential complex just launched in the area you liked. Always compare offers from several banks and study the real estate market before signing any documents.

2. Not Accounting for Additional Costs

The down payment is far from the only expense in a mortgage. The pledged property must also be insured, and the insurance must be renewed every year until the loan is fully paid off.

Property insurance against damage or loss is mandatory. Life and health insurance is optional, but rejecting it can lead to an increase in the interest rate. You may also need to pay for:

• real estate agent, broker, notary, or appraiser services;
• state duties and registration fees;
• bank commissions for rate reduction or additional services.

3. Failing to Plan Your Budget and Ignoring Emergency Scenarios

If your mortgage payment exceeds one-third of your household income, the risk of falling behind on payments rises sharply. This should be taken into account at the preparation stage — carefully plan your budget, review your spending, and consider possible emergencies such as illness, job loss, or major repairs.

Ideally, before taking out a loan, you should build an emergency fund equivalent to at least 3–5 monthly payments. This will give you a financial cushion in case of unforeseen events.

4. Signing the Loan Agreement Without Reading or Clarifying It

Many borrowers sign their mortgage agreements without reading them carefully. Legal language can be complicated, and some people rely only on what the bank employee says — which is a big mistake.

In reality, most mortgage agreements are written clearly enough, and any unclear points can be clarified with the bank manager. You’re taking on a major financial obligation, so spend the time to fully understand what you’re agreeing to.

Pay special attention to the following clauses:

• the interest rate and conditions under which it can change;
• the amount and frequency of monthly payments;
• the timeline for transferring funds to the escrow account (if buying a new property).

Also, carefully review the conditions for early repayment. If the contract prohibits early repayment, or allows it only after several years, or imposes extra restrictions — think twice before signing. Flexibility in repayment can save you a lot of money in the long run.

What to Do If You Can No Longer Repay the Mortgage

If you realize that you can’t continue servicing your loan, take action early — delaying only makes things worse and limits your options for negotiating with the bank. Here’s what you can do:

• Request loan restructuring. This means changing the terms of your existing agreement to make payments easier for you (for example, by lowering the rate or extending the term).
• Apply for a mortgage payment holiday. This is a grace period (usually up to six months) during which you can temporarily stop making monthly payments.
• Refinance your mortgage. Take out a new loan to pay off the old one, ideally with a lower interest rate or better terms to reduce your monthly burden.

Keep in mind that all of these options are much easier to arrange if you don’t have serious overdue payments. Open communication with the bank and timely action can help you avoid penalties and protect your home.