Three common mortgage myths
Some homeowners are generally familiar with home loans and mortgages and how they operate, but not everyone knows all of the ins and outs of the mortgage business.
Many know the basics, but they might not know the intimate details which should cause them to pay attention to rumours and myths surrounding mortgages which, for the most part, aren’t true. Let’s take a look at just three mortgage myths and comment on the real truth behind these myths.
- All variable rate mortgages end up with about the same amount of interest tacked on
It is a common misconception that variable rates don’t really make that much difference in the grand scheme. The reality is just the opposite. There is actually a solid 2% difference, and you’ll notice the impact of it. For instance, a loan of $350,000 for 30 years carries an average interest of about 5.2%. That same loan with a variable interest rate comes in at about 4.64%. This difference suggests a $125 saving every month and an ultimately total at about $43,000 in savings over the entire duration of the loan. There are benefits to both fixed v’s variable interest rate options – Please contact us and we will work through what suits your home ownership strategy.
- Refinancing is prohibitively expensive
Not true. Since the ban on bank exit fees for variable rate home loans began in 2011, it’s been a great deal easier for Australians to refinance without getting stuck with any hefty extra fees. It is true that break costs are still applicable for home loans with fixed rates, but by consulting with your broker, you can get an analysis of the savings you’ll see over the duration of the loan versus the break costs you may have to deal with. You will have a clear picture of what you are in for so you can make an informed decision about whether to proceed with refinancing or not.
- In order to buy property, your deposit should be 20%
This is also absolutely not true! It’s no surprise that many people might think 20% is the mark to hit because some people do put that much into their deposit to reduce the amount they have to finance and to avoid Lenders Mortgage Insurance (LMI). However, this is not always a requirement. Many lenders will accept a deposit of just 5% and there are some lenders that will consider less than 5% with Lenders Mortgage Insurance. However, if required the LMI can be included within the loan amount, which means you can still be a home owner without too much pain in the long run.
These are only a few of the many myths surrounding home loans. Many of these myths start over a family and friends BBQ – it is always better to seek professional advice
At All Nation Finance we are professionally qualified with many years of experience to help you do your due diligence before jumping to conclusions about what is true and what’s not.
Having all the facts will help you to get the most beneficial mortgage possible, which will ultimately be good for you and for your family. Contact Alan on 08 9403 9437.