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Top 12 Mortgage Myths Exposed
Posted September 22nd, 2010
and last modified May 27th, 2011
When you are buying a home you will hear a lot of myths about mortgages. Here are the top 12 we have found and dispelled!
- Myth 1. A bad credit history doesn’t matter if you eventually pay it off – Having a bad credit history is due to both paying off all you debts and paying them on time. There are two companies in Australia that will record the credit history and late payments will count towards some of the credit rating.
- Myth 2. Assets are the same as income – While assets may help you secure a loan the lenders will generally judge your ability to pay off the loan on your income. If you have a lot of assets the amount that you will be able to borrow will usually be determined by your income, not the assets.
- Myth 3. It’s the credit card balance, not the limit that counts – The amount of money that you are able to put on your credit card will determine how much of a risk you are. When you are applying for a loan you should reduce the amount of money that you will be able to put on the card.
- Myth 4. You need a 20 per cent deposit to get started – Many of the loans today will let you borrow more than 80% of the property value. In fact, many lenders will actually let you borrow 100% of the property value with certain loans.
- Myth 5. Cheapest is the best – Many people will simply look at the interest rate to determine how cheap the loan will be. However, the lowest interest rate loans may not be the cheapest. Look for features that will help you save money or even fees that will increase the amount that you pay.
- Myth 6. A fixed rate is always safer than a variable rate – Fixed rate loans will save you money if the interest rates rise by enough to cover the inflated interest rates these loans offer. Only fix the interest rate if you believe the rates will rise by enough to cover the extra you will be paying at the start of the loan.
- Myth 7. Personal debts can be rolled into a new home loan – You will usually not be able to roll all your debts onto your home loan when you first start paying it off. Generally, you will have to gain some equity in your property before you will be able to do this.
- Myth 8. 100 per cent loans = no money upfront – While the 100% loans will not require you to pay any of the property price you will have to pay the upfront fees and duties that are usually payable with all property purchases.
- Myth 9. Mortgage insurance protects the borrower – The lenders mortgage insurance does not cover the borrower against failed payments. The lenders mortgage insurance is there to protect the lender in case you fail to make the repayments.
- Myth 10. Home loan offset accounts save you money – The offset accounts can save you money. However, if you do not have savings that can be put into the account then you will generally not want a loan with this feature.
- Myth 11. Making your repayments minimum and monthly is the best strategy – The interest on home loans is usually charged monthly but is calculated daily. So by making weekly repayments onto the loan account you will save money on interest.
- Myth 12. Refinancing costs you money – If you are in a loan that is not ideal you may want to refinance. If your interest rate is very high then refinancing can save you money over the life of the loan.
Related posts:
- Top 12 Mortgage Myths – How to Save Money with Your First Home Loan
- Factors That Determine Borrowing Amount
- Home Loans for the Self Employed
- How much can you Save with an Offset Account?
- How to Release Equity from Your Home
- A Guide on What to Ask Your Low-Doc Lender
- Using a Combined Account to Repay your Home Loan Faster
- St.George Low Doc Home Loan <$500k
- Benefits of Refinancing a Home Loan
- NAB Tailored Home Loan – Fixed Rate (Interest Only paid in arrears)
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