Finance Myths

Finance Myths

When it comes to finance, there are many theories and myths floating around. Generally, these don’t take into account your personal requirements, goals and circumstances. When it is time to get finance for your first home or if you are intending to refinance, it is best to talk to a professional in the industry who can give you the best advice to suit you and your situation.

Let’s take a look at some of these finance myths and break them down for you.

1. Mortgage Brokers are influenced by lender commissions.

Mortgage Brokers do get paid by commission but this stays the same no matter which lender the client uses. A broker has a very good understanding of the loan market and the types of products on offer meaning they can normally offer a better suited loan option than the client could find themselves.

2. I need a pre-approval before I can make an offer.

While submitting a mortgage pre-approval letter along with your bid on a home can give you an edge over rival buyers, it isn’t necessary to have one to make a purchase offer. Talking to your mortgage broker before you start looking at properties can help give you an idea of what steps you might need to take to get ready for a finance application and an idea of what price range of properties you would be looking at.

3. I need to have 20% deposit ready to apply for a home loan.

Have you been saving madly to reach that 20% deposit? Depending on your circumstances and the type of property you are looking for, you might not necessarily need a 20% deposit. Some lenders will allow you to borrow up to 95% of the value of the property. You will need to take into account that a lenders insurance could be charged if your deposit is less than 20%.

If you are a first home buyer and you are eligible for the First Home Loan Deposit scheme, an additional 10,000 places have been allocated for first-home buyers to secure their purchase with a 5% deposit.

4. I should always take the lowest interest rate.

Consumer focus on low interest rates while a key motivation, shouldn’t be the only thing that is taken into consideration when choosing a home loan. Home loan packages have come a long way in recent years and they can offer many different benefits to a client depending on their circumstances and goals. For instance, a young family purchasing their first home will likely be looking for very different features in a loan to a couple whose children have left home or an individual.

This is where having the experience and knowledge of a professional mortgage broker can be a huge advantage when deciding on which loan features will benefit you over the long term.