With interest rates at an all-time low, now may be the right time to jump into the property market.
However, before thinking seriously about buying property, it's good to understand the difference between mortgage myths and realities. Being able to identify between the two will help you make the right decisions for your mortgage needs both now and in the future.
In this article we help by debunking the 5 most common mortgage myths.
1.Lenders Mortgage Insurance protects the borrower.
Lenders Mortgage Insurance (LMI) does not protect you, it protects the lender. Lenders Mortgage Insurance is a one-off fee that home buyers are required to pay when they want to borrow more than 80% of their property’s value. To sum it up, it’s 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.
2. Banks don't like lending to single people.
Some people feel that being single might disqualify them for applying for a home loan. However, it doesn’t matter whether you are single or partnered, banks and lenders are just focused on ensuing you have the financial capacity for paying off the home loan.
3. Borrowers will find the best rates online.
Doing your own online research has never been easier yet it doesn’t always result in finding the cheapest rate. Lenders are highly competitive and are currently competing for business and as a result are willing to offer significant discounts to borrowers. This can mean that borrowers are sometimes able to access a home loan with a cheaper rate than advertised. We also have excellent relationships with many lenders and because of this they will be able to source sharp rates that might not be advertised online.
4. The best home loan deal will come from your current lender.
There are many borrowers who like to go straight to their current lender or bank to apply for a home loan. However, this will not always provide you with the best rate and home loan deal on the market. While lenders do recognise and reward loyalty, it still pays to shop around for the best deal by asking your mortgage broker to do some research for you.
5. I can't get a home loan because I'm bankrupt.
Credit defaults or bankruptcy will not disqualify a potential borrower for a home loan. There are home loan options available for people with adverse credit histories. The key is to be up-front about your history with your lender and your mortgage broker.