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Mortgage Myths

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16 / Apr / 2008

 

  • ‘A bad credit history doesn’t matter if you eventually pay it off.’
    A patchy credit history can haunt you – even if it is very old or just a one off small amount. Especially now.
  • ‘Assets are the same as income.’
    What really matters is your capacity to repay the loan through a regular income. Owning a car, boat, jet ski etc does not show affordability.
  • ‘It’s the credit card balance, not the limit that counts.’
    In reality, the less available credit you have  – such as credit cards and other loans – the better. It’s the limit that counts – reduce the limit if possible. Interest free cards often bigger limit than thought.
  • ‘You need a 20 per cent deposit to get started.’
    These days, you can borrow up to 100 per cent of the property value.
  • ‘A ‘cheap as chips’ interest rate is the best.’
    In many cases, these loans may have higher fees and less flexibility, costing you more money over the life of your loan.
    Rate is NOT the bottom line.
  • ‘A fixed rate is always safer than a variable rate.’
    Every home loan is different and so too are your home loan needs.
  • ‘Personal debts can be rolled into a new home loan.’
    Often you will need to wait until the property builds some equity before you can re-finance and roll all your additional debts into the mortgage.
  • ‘A 100 per cent loan means no money up-front.’
    This loan does not extend to the additional up-front fees involved in buying a home such as legal fees, Lender’s Mortgage Insurance, purchase and mortgage duty.
  • ‘Minimum, monthly repayments are best.’
    Paying as much above the minimum as possible is the fastest way to pay off your home loan.
    30 year loan will reduce to about 24 years with fortnightly pmts, & between 23 & 24 with weekly pmts.

    Difference between weekly & ‘true’ weekly.

  • ‘Mortgage insurance protects the borrower.’
    More commonly known as Lender’s Mortgage Insurance, this form of insurance protects the lender, not the borrower.
  • ‘Home loan offset accounts save you money.’
    Offset accounts are not for everyone – people with poor spending habits or irregular income would be best to avoid these.

 

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