If you’re looking to buy a house, you’re probably getting all sorts of unsolicited advice. While most of it is probably said in good faith, it might not all be very helpful. What worked in the 1980s, won’t work in the 2020s.
Here are some of the most common myths and out dated mortgage advice that we keep hearing.
1. Go straight to your bank
Older generations had a different relationship with their banks, often knowing the manager personally. That’s very rare these days and, even if you do know the manager of a big four bank in Newcastle, it’s unlikely they have that much sway. There’s also no such thing as a preferential rate for a loyal customer.
If you only ask your bank about a mortgage, you’ll only get one number for your borrowing capacity and one interest rate.
If you go to ten banks, you’ll get ten options for each (but severely damage your credit score).
But if you speak to one of our mortgage brokers, we’ll look through the offers of 60+ lenders and highlight the best options for you – and we don’t touch your credit score until you’re ready to actually apply.
Here’s Sarah explaining how there was a $400,000 different for one of her clients:
2. You need to save at least 20% for your deposit
Until recently, you needed to have a 20%deposit if you wanted to avoid lenders mortgage insurance (LMI) being added to your loan.
Things have changed for first home buyers now and so long as you have at least 5% as your deposit then you’ll avoid LMI.
For those who don’t qualify, you need to think about how quickly you can save more for your deposit. Many people hold that 20% benchmark as sacred but it could be cheaper just to apply now. If you have a 15% deposit and calculate the LMI you’d pay versus how much properties might rise in the time it takes you to save that last 5%, you might be better off applying now.
One thing that does hold true is that the more deposit you have, the smaller loan you’ll need. This will reduce your payment amount so it is still something to think about.
3. Wait for interest rates to drop/the market to slow/the bubble to pop
Waiting for any reason is risky. People want you to wait for the market to drop, for the ‘bubble’ to pop, for rates to drop, but no one ever knows when that happens. Some people have been waiting decades for it to happen.
Buying at exactly the right time is impossible to predict so don’t even try. The internet is littered with people wrongly predicting crashes – both financial experts and randoms on Reddit – because no one knows what will happen next.
The old saying that ‘time in the market beats timing the market’ is true in so many cases. Again, by waiting, you’re just giving property prices the chance to run away from you.
4. Meet with your lender in person
Going back again to the time when people had personal relationships with their bank manager, the idea of meeting face-to-face was very important.
Nowadays, there’s less emphasis on this. While our brokers are more than happy to meet you if you’re in Newcastle, it’s not a requirement. We work over the phone and online, making it easier for you to go about your day.
It also means that we can help house hunters all across Australia, not just in Newy.
As for lenders, it also opens up your possibilities and gives you access to better options.
5. Search for your house in a specific month or season
While there might be certain trends that are true, if you want to buy a house then just buy the house.
It doesn’t matter if it’s spring or winter, November or Wednesday. There are lots of considerations when you but a house, and due diligence is definitely important, but trying to time the market very rarely works.
Missing out on a home you like only to find prices have risen anyway is a fool’s goal.
Mortgage advice you can actually trust
Instead of listening to your weird uncle who bought a three-bedroom home and supported a family with a part-time job in the 80s, listen to the professionals.
Our mortgage brokers in Newcastle know about the best lenders, all the modern regulations and give impartial advice.
You face a lot of new challenges when you buy a home, and we’re on your side to try to get you the best finance available.