5 Mortgage Myths Debunked

One of the most common myths you might hear is that you need a 20% deposit to secure a mortgage. While it’s true that a larger deposit can help you avoid Lenders Mortgage Insurance (LMI) and reduce your overall loan costs, many lenders offer loans with deposits as low as 5% to 10%. Additionally, there are government schemes, such as the First Home Loan Deposit Scheme, that allow eligible first-home buyers to purchase with as little as a 5% deposit without having to pay LMI. Several lenders also offer LMI waivers for professionals. It’s essential to explore all your options and speak to a mortgage broker who can guide you through the process.

Not all lenders offer the same mortgage rates, and this myth can lead many borrowers to miss out on potential savings. Interest rates and loan products can vary significantly between lenders due to factors such as their funding sources, risk appetite, and target markets. As a mortgage broker, I have access to a wide range of lenders and can help you compare rates and find a loan that suits your financial situation. This personalised approach can lead to substantial savings over the life of your loan.

Many borrowers believe that obtaining a pre-approval for a mortgage guarantees that they will receive the loan. While pre-approval is a useful step in the home-buying process, it is not a guarantee. Pre-approval means that a lender has assessed your financial situation and is willing to lend you a specified amount, subject to final checks and conditions. Changes in your financial circumstances, such as a job loss or increased debt, can affect your eligibility for the loan. Always ensure your financial situation remains stable between pre-approval and final approval.

Another common myth is that once you choose a loan structure, you’re stuck with it for the duration of the loan. In reality, many borrowers can and do change their loan structures as their financial situations evolve. For instance, if you initially opted for a variable rate loan but your circumstances have changed and you would now prefer the stability of a fixed rate, you may have the option to switch your product. You can also adjust features like offset accounts, redraw facilities, or even the loan term. Regularly reviewing your mortgage and consulting with a broker can help you make informed decisions that align with your financial goals.

While renting may appear to be cheaper in the short term, it’s essential to consider the long-term financial implications. In many cases, mortgage repayments can be comparable to or even less than rental payments, particularly in a rising property market. Additionally, when you buy a home, you are investing in an asset that can appreciate over time, potentially leading to significant capital gains. Rent payments, on the other hand, do not contribute to building equity. It’s crucial to assess your personal circumstances, long-term goals, and the local property market when considering whether to rent or buy.

Understanding the truth behind these mortgage myths can empower you to make informed decisions when navigating the home loan process. Your mortgage broker is there to provide clarity and guidance, helping you find the right loan for your needs. Whether you’re a first-time buyer or looking to refinance, dispelling these myths can lead to better financial outcomes and a smoother journey toward homeownership. Always seek professional advice tailored to your individual circumstances to ensure you’re making the best choices for your future.