Common home loan misconceptions

With rules around lending constantly changing, new lenders coming into the market, and people turning to family and friends for advice, when it comes to buying a home and taking on a mortgage, it can be difficult to separate fact from fiction. Some of the most common misconceptions are noted below.  

The lender
With hundreds of lenders available to choose from, it can be overwhelming and time consuming to compare what’s out there. Whilst banks are seen as the 'go to' option, they may not always offer the most competitive deal for your situation. This is where a broker can help by comparing different interest rates and loan products from a panel of lenders including the big four banks. Our lender relationships allow us to look at the amount that can be borrowed with each lender depending on the different lending criteria.

The deposit
A bigger deposit will look better on a loan application, and ideally that’s 20% of the purchase price. If the deposit is less than this or there is no deposit at all, getting a home loan is still achievable. The choice of lenders available for these situations definitely narrows and Lender’s Mortgage Insurance may need to be paid. In the case of no deposit, other property equity will have to be used or someone will need to go down as guarantor.

The interest rate
Don’t assume that the loan with the lowest interest rate is the cheapest. Yes, the rate is important when looking for a home loan, but often there are fees which are also associated with the loan and not factored into the interest rate. These can be for applications, monthly or annual services, establishment, legal and redraw fees. It’s best to also look at the comparison rate which sits alongside the interest rate and accounts for these fees and charges. Many cheaper loans also have lending restrictions around deposit sizes or particular properties which can be attached to the loan. Using the services of a broker can help as we deal with a number of different lenders on a daily basis and can help explain which loan would be right for your situation.

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