With interest rates hovering around record lows, now may be a great time to jump on the property ladder.
Of course, if you are seriously considering purchasing property this year, it is important to know the difference between mortgage myths and mortgage realities. Being able to identify myth from reality will help you to make the right mortgage decision for your needs, both now and into the future.
In this article, we debunk the five most common mortgage myths:
Lenders Mortgage Insurance protects the borrowerThere is a common misconception amongst borrowers that Lenders Mortgage Insurance (LMI) protects them in the event they default on their loan. In reality, LMI protects the lender, not the borrower. Lenders Mortgage Insurance is a one-off fee that home buyers who are looking to borrow more than 80% of their property's value are required to pay. In a nutshell, it is an insurance that protects the lender against the risks of providing a borrower with a home loan, in the event that they default on their repayments. LMI will not cover the borrower if something happens to them and they cannot afford their mortgage repayments.
Banks don't like lending to single peopleSome potential borrowers wrongly believe that they will have trouble obtaining finance because they are single and not looking to take on a loan in conjunction with another person. In reality, this is not the case. A lender will more than happily provide finance to a single person provided they can show they have the ability to service the home loan comfortably.
Borrowers will find the best rates onlineSome borrowers wrongly believe that they can find out which lender is offering the cheapest rate by conducting some simple research online. The fact is, Australia's lenders are currently competing for business and as such, are willing to offer significant discounts to borrowers. These discounts could then mean that a borrower is able to access a home loan with an interest rate that is cheaper than the lender's advertised rate. Mortgage brokers have excellent relationships with many lenders and because of this, they will be able to source borrowers sharp rates that might not be advertised online.
The best home loan deal will come from your current lenderA lot of people will look to get a home loan from their current lending institution because they believe that this lender will provide them with the best rate and home loan deal on the market. Unfortunately, this isn't always the case. While lenders do recognise and reward loyalty, it still pays for a borrower to shop around. A borrower's unique mortgage needs may mean they are actually able to find a better home loan deal with another lender.
I can't get a home loan because I'm bankruptCredit defaults or bankruptcy will not disqualify a potential borrower for a home loan. You may be interested to know that there are home loan options available for people with adverse credit histories. The key is to be up-front about your financial history with your lender and your mortgage broker.
Regardless of where you are in the process, it pays to meet with a mortgage broker to make sure you're on the right track. Your broker will be able to answer all your questions whether it's understanding industry jargon or getting guidance and a savings plan.
Meet with a Mortgage Choice broker today and speak to one of a friendly experts on 13 77 62.