The Best Home Loan Has the Lowest Interest Rate…and Other Mortgage Myths
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Myths, old wives tales, call them what you will. There are a number of misleading ideas around mortgages that can trick you into, or out of making the best decisions for you and your finances.

The truth is, there is no mortgage package that suits everyone, there’s no solution that fits all situations, and unfortunately, no real way to avoid all that pesky interest. However, property adds value to your hard earned dollars faster than any savings account ever could, meaning property will still be the biggest and best investment you will ever make.

But how will you find what works best for you? How can you decide what best meets your property and mortgage needs? Let’s start by debunking the 5 biggest home loan myths:

1. The best home loan will have the lowest interest rate.

A low interest rate is great! I mean, you’ll be paying this loan off over the next 20-30years, a low interest rate could potentially save you thousands, right? Not always. Does the low rate mean you have to fix for longer – and therefore possibly miss out on better rates in future? Are there hidden fees? Are the low rates only for a short amount of time? A home loan is a long term commitment and while the short term needs to be considered too, keeping the years in perspective is crucial to a healthy mortgage.

2. You’re better off sticking with one of the major banks.

The overall demand on the property market has seen a boom in new financial lending institutions in the last decade. Long gone are the days when banks were the best – and only – option. These days there an increasing number of accredited and thoroughly regulated financial services that can offer a range of lending options that may work better for you. Borrowing is complex, and to find your best options you may need to shop around.

3. Having a deposit is your only hurdle.

With rent prices at an all time high in most regions, saving for a first home deposit is tough enough. You also need to keep in mind that there are a number of costs involved with buying a property that you will need to cover. Lawyer’s fees, builder’s reports, LIM reports, property valuations, and then ongoing costs like insurances, rates, property maintenance etc. This list can seem very intimidating, and although in some instances, a number of these costs may be covered by your home loan package, you will need to be prepared to cover these costs as they arrive.

4. Online mortgage calculators are a great indicator of what you can afford.

Unfortunately, this is very, very not true. In fact, online calculators as so completely unaware of your true circumstances that even a University student working part time could be lead to believe they are eligible for a significantly sized mortgage (think $420.000+). Hardly likely, is it. As handy and easily accessible as these online tools are, the only way you can get an accurate and reliable outline of your finances and your mortgage affordability is by speaking with an authorised financial adviser.

5. A home loan is a great way to consolidate debt.

While the interest rate on your mortgage may be anything up to 20% less that a vehicle loan, the timeframe on your mortgage is considerably longer than a vehicle loan meaning you could be paying more than quadruple the value of your vehicle over your loan term.

There are endless ways you can have a smart mortgage that works for you, the challenge is putting all of the pieces together so you have a strong foundation to build your borrowing on.

It’s all about staying well informed, minimising the risks, having well-balanced finances, and having a customised solution to get your money and your mortgage working for you.

Need advice? We specialise in mortgages and personal insurance so contact Sam Kodi if you’re looking for the best mortgage solution for you.