Your best friend Mary says all you need for a deposit on a home is 10 per cent of the cost. Your cousin Bob tells you something different. And Aunt Sheila says you won’t even be able to get a home loan because of that string of late phone bills you had when you were 19.
What’s the real story?
Your situation is your own, and some facts may be more relevant for you than others. But you can put to rest a few of the most popular myths circulating about home buying right now, no matter your real estate goals or financial circumstances.
Myth 1: Paying a mortgage will be like paying rent
It’s true that your mortgage payment could equal an amount similar to a monthly rent payment. But that’s where the similarity ends. Your rent doesn’t have interest or a loan attached to it and you can slip out of it pretty easily should you want to switch properties. The stakes for missing a home loan payment are also much higher. To get yourself better prepared for buying your first home, read our Home Buyers Guide.
Myth 2: Just have a deposit
While it’s needed, having the bare minimum of a deposit may put you at risk for coming up short on money for inspection fees, lender’s fees and other costs, points out Peter Boehm, author of “The Great Australian Dream: A Guide to Buying Your First Home.” To figure out how much you’ll need to cover your property purchase, plug your details into our home loan calculator.
Myth 3: You only need money, not income
Just try getting a loan when you’ve had a spotty employment history. Things like inheritances aren’t bad in and of themselves, but if you’re living off them and not working, the lender may be reluctant to give you a loan.
Myth 4: Your debts will be forgiven
If you’ve maxed out your credit card a dozen times in the last decade, you are not demonstrating the ability to pay off a high-cost debt like a home loan. Lenders want low-risk borrowers.
Myth 5: Cheapest is best
Another bit of advice from Peter Boehm is to really scrutinise the hidden fees behind your loan. The lowest upfront rate may actually mask a short-term deal and less wiggle room with the loan terms. Compare loans to find the right one for you with our Home Loan Selector Tool.
If you’ve ever owned property, what are some home loan myths you debunked?