If you’re close to buying your first home, you may have begun to realise the questions and confusion that can sometimes come with it.
At Hunter Galloway, we are mortgage brokers that specialise in helping First Home Buyers with navigating the home loan process. Our goal is to make sure you have the knowledge and support you need, through removing some very common misconceptions around home loans and buying your first home.
So today we’re going to go through and debunk 5 common first home buyer myths.
- Myth #1: You can’t get a home loan if you have a HELP debt
- Mistake #2: Settling with a Variable Rate
- Myth #3: You shouldn’t put less than 20 per cent deposit down
- Mistake #4: Believing that your pre-approval is fine for any property type
- Mistake #5: Choosing the first mortgage broker that your family recommend
Myth #1: You can’t get a home loan if you have a HELP debt
Would you believe us if we said you can have a HELP debt and still pay off a loan? You can! But the mistake people make is choosing the wrong lender in this circumstance.
The banks look at your HELP loan from an angle of – how much you’re required to pay each year.
So overall it may lower your borrowing capacity however it won’t rule you out completely.
For example, if you earn $55,000 and owe HELP, the bank will factor in $55,000 at 4 per cent equalling $2,200 per year in repayments which will slightly lower your borrowing capacity, but it won’t rule you out altogether! You can see more examples for different income brackets below.
Read More: First Home Buyer Guide
Mistake #2: Settling with a Variable Rate
Many first home buyers believe variable rates are best for them, as from an outsiders perspective they seem like the logical option – with flexibility and additional repayments on offer.
There’s also the opportunity to open an offset account to reduce interest costs each week too, really, the perks seem worth it.
Yet consider a fixed rate if you’re looking to budget over a one to three-year timeframe.
Knowing that your repayments will remain the same gives you security and sureness towards what’s to come. Another option that many first home buyers don’t know about is a split loan. This gives you the flexibility of – part fixed and part variable.
The best of both worlds, for some.
Myth #3: You shouldn’t put less than 20 per cent deposit down
Times have changed and the old belief of putting down at least 20% deposit is no longer true.
Of course, the bigger your deposit, the less you’ll need to borrow, so the better off you’ll be and you will avoid lenders mortgage insurance too. However, this isn’t always a possibility for some.
For our buyers, anywhere between five to eight per cent of the purchase price is accepted and going with this is a great idea to help get you into the market.
Our statistics show that 81 per cent of our buyers put down less than 20 per cent deposit on their first home. Consider some of our low deposit options starting from as little as five per cent (or guarantor loans where you don’t need any deposit at all).
Another thing to remember is your profession and how this impacts your deposit. For doctors, lawyers, nurses and other certain lines of high income, reliable work, often lenders mortgage insurance can be waived.
Read More: How to buy a house (step-by-step process)
Mistake #4: Believing that your pre-approval is fine for any property type
One thing many first home buyers don’t realise is that if you have been pre-approved to buy at a particular price, the property type can impact how much the bank will ultimately let you borrow – or even if they will lend to you at all!
Something to keep in mind is that not all banks lend to inner-city postcodes and some have restrictions on unit complexes.
This is why the property type is so important, as this can be a reason the bank declines your loan. Speak to your mortgage broker about the type of property you’re looking for and confirm if your bank will accept it.
Check out this article which breaks down all the ways you can confirm if your pre-approval is reliable.
Read More: How reliable is your pre-approval?
Mistake #5: Choosing the first mortgage broker that your family recommend
While we love referrals, our advice to you is to speak with a few different mortgage brokers before you get started with one.
Read reviews, speak to previous clients and look at if the broker has dealt with similar situations to yours in the past.
The last point is especially important, as this will help you determine how the process went and show how much experience with your personal situation they have had before.
Another thing to consider is their personality.
You are going to be building a long-term relationship with your mortgage broker, so you want to make sure that they are patient and will guide you through the process. Just remember, go with a broker that will suit your style.
If you have any further questions about buying a home for the first time speak to our team of experts today.