Perhaps the most common mortgage myth.
Nothing could be further from the truth.
Lenders allow you to borrow up to 95% of the of the value of a property, meaning you only need to have five per cent up front to put toward the cost of your home.
Better still, if you are eligible for grants such as the for a first home owner grant, lenders may allow you to use this towards the cost of your home.
A common misconception that borrowers believe is that Lenders Mortgage Insurance will cover them if they default on their loan. LMI is designed to protect the lender, not the borrower.
It does this by covering the lender if you default and they need to sell your property but don’t pay your loan in full.
Obviously, the more you owe on a property the greater the risk is that this will happen. Often lenders make you take out LMI if you owe more than 80% of the value.
Long ago, if a loan was with one lender, transferring it to a secondary lender was strenuous and not cost effective . However, refinancing has simplified this greatly.
But the good news is that much of that approval process now happens online and is relatively straightforward. Additionally, if you choose to use a mortgage broker can apply on your behalf, saving you even more time & money.
****Important to note: because you’re taking out a new loan, you will have to go through the home loan approval process just as you did when you took out your current loan.
When some people hear that interest rates are at record lows, they wonder why the interest rate they’re paying on their loan isn’t the same as the official one. The main reason is that the official cash rate reflects what financial institutions can borrow money from each other at, not what they will lend it to home buyers for.
It is actually your lender who sets your interest rate, not the RBA. While the official cash rate will go some way to determining what your lender charges, they will consider other factors affecting their cost of lending (such as the state of global markets and government regulation, competition in the lending marketplace etc) With interest rates varying between lenders and home loan products –it is worth shopping around.
Pre-approval/conditional approval is a lenders indication that you may be approved for a loan to a certain limit should you meet certain criteria.
While this is an important first step in your property search, it is not the same thing as receiving unconditional approval for your home loan simply because it is still conditional on the lender verifying certain criteria.
You will need to verify your income and expenses and have a credit assessor check out the finer details of your application.
Getting approved when you’re single can be challenging with only one income. But it’s certainly possible.
As long as you can prove you meet the requirements and have the ongoing capability to repay your loan, you’re still likely to be approved for a home loan.
Finally, a lot of people will tell you it’s impossible to get a loan at all in today’s lending environment.
Again, that’s simply false.
It’s true that lenders are less inclined to base their estimate of your living expenses on a calculator than they once were. This means they will ask for more detail about your income and expenses than they previously did.
It’s also true that they may be prepared to lend less than they were once prepared to. However, they most certainly are still lending – so long as you meet their loan criteria.
As each lender has different lending models, it’s more important than ever that you choose the one that’s most likely to approve your loan application. That’s where a mortgage broker is advised.
As they deal with lenders day-in and day-out they should know not only which mortgage product suits you best but also who’s most likely to provide you with the finance you need.