Myths are those pesky things that everyone believes but a just down right not true. They get told over and over again until everyone thinks they are right … and they hold us back. In our heads, we let these false truths stop us moving forward. What we need is a good dose of myth busting.
That is my job today … to bust mortgage myths that may be costing your money or stopping you moving ahead with creating a wealthy life.
Mortgage myth #1: The lowest rate is always preferred
You know when interest rates drop. It is all the media can talk about. But this does not mean the lowest rate will save you money. My last blog talked about when is the right time to refinance so you know a little about how I feel about this. The lowest rate might not actually be the most competitive. Sometimes, a low rate incurs other fees, which a slightly higher rate may not.
The lowest rate might not be the most flexible, and may not have other interest saving features e.g. an Offset account that a slightly higher rate loan product might.
Mortgage myth #2: You need a 20 per cent deposit to secure a mortgage
You know what they say about assuming? Assume makes an ass out of u and me. When the housing affordability reports come out, it is assumed buyers have a 20 per cent lump sum deposit. Because of this, some buyers believe they cannot secure a mortgage without the 20 per cent lump sum. So not the case.
This bit of gold is from the Reserve Bank of Australia (RBA) … some lenders accept a deposit as low as 5-10 per cent. Lender’s Mortgage Insurance (LMI) may reduce the deposit required – the cost all rolled up into the mortgage or can be paid as a lump sum. The key is not to overextend yourself – you do not want to be struggling week after week just to pay the mortgage – two minutes noodles are only good for so long.
Mortgage myth #3: You need to pay mortgage broker fees
If you work with me, I will tell you in no uncertain terms, upfront, that using my services as a finance broker will cost you nothing. You don’t pay me. The banks do. My job is to get you the best rate … and I do this by tapping into the over 25 lenders I work with. I know their product inside and out is so I can help you weigh up the choices.
Mortgage myth #4: The Reserve Bank of Australia controls the rate, so rates aren’t competitive
Economic growth or lack of growth impacts Interest rates changes made by the RBA. Lenders can choose to pass on the changes or not. Most of them change the rates to reflect the RBA – after all they want to be competitive. The key here is to review your loan regularly … and the good thing is, working with you, I do this for you.
Mortgage myth #5 There is no difference between paying your loan weekly, fortnightly or monthly
Ah … hello! How does less interest paid sound? The more often you make payments, the less interest you pay. You will pay even less interest if you pay it weekly.