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TOP 30 HOME
LOAN MYTHS
BUSTED
Australia, its time for a fairer deal so weve busted Australias Top 30
home loan myths. Inside weve revealed what some lenders bury deep
in the fine print and dont want you to know about.
Isnt it time you deserve a fairer deal on your home loan?
Read on for the truth, then chat to one of our Wealth Managers.
Theyll help show you the way ahead to smash your home loan.
To get in touch, visit ybr.com.au/myths and register with your details.
Cheers
Mark
#01
Refinancing is too expensive, and with exit costs its not really worth it.
Exit fees on variable rate loans were banned in 2011, so most Australians can refinance without getting hit with
a hefty penalty. However break costs on fixed rate home loans are still applicable. Most mortgage brokers can
analyse the life of loan savings versus the break costs for you.
You can judge how competitive a home loan is from its interest rate.
#02
Not all costs of a home loan are captured in the interest rate. There are often ongoing fees and set-up and
exit costs that need to be taken into account. When comparing loans to refinance, always take a look at the
comparison rate which takes all fees, costs and introductory or short-term special rates into account.
Its not worth refinancing for a rate only 0.5% lower than your current rate.
#03
#04
Depending on your loan size, refinancing can be very worthwhile. For example, if you have a $400,000, 30 year
loan and your rate is 5.5%, switching to a 5.0% rate could save you nearly $125 per month or nearly $45,000
over the life of the loan!
#05
#06
If the bank youve been with for years wont give you a loan, then no
other bank will.
Banks have different policies and different lenders focus on different criteria. Often a mortgage broker can
help you find a loan that suits your individual needs.
#07
Its better to have cash for emergencies than use it to make extra
loan payments.
Just about all variable rate home loans have redraw access which allows access to those additional funds. Many
variable loan accounts also offer an offset account which helps reduce home loan interest where the balance in
the offset account is subtracted from the loan balance for the purposes of calculating home loan interest.
You cant use the equity in your home to help fund an investment.
#08
#09
Most home loans allow you to set up separate accounts under the one mortgage. This allows you to keep your
investment and home loan debt separate. However, you should always seek independent financial and tax advice.
#10
Some lenders dont charge a premium for a Line of Credit facility. Its true that a Line of Credit is not suited to all
borrowers, especially ones who are having difficulty budgeting or lacking financial experience. Its worth speaking
to an expert who will match you with a loan to suit your needs.
#11
The RBA adjusts the cash rate from time to time based on a number of domestic and global economic factors.
While these changes influence mortgage rates, lenders also consider other factors ie deposit rates and other
funding costs. Essentially, each individual lender has the ability to change their rates how and when they see fit.
#12
#13
Lenders can move their variable rates at any time and how they compare to other lenders can vary. Therefore a
loan thats competitive today might not be as competitive in a couple of years time. Its ideal to review your loan
every year or two to ensure that your rate is still competitive.
#14
#15
Its not wise to borrow outside the safety of the big four banks.
#16
#17
Many smaller lenders have more competitive rates and flexible terms than the major banks. With the Federal
Government banning exit fees, it provides consumers with greater power and choice to refinance to a better deal.
During the Global Financial Crisis, the Government guarantee of bank deposits prompted this myth, however, the
guarantee only extends to deposits not loans.
#18
You can save on your loan by trying to time the market with fixed
rate loans.
If we could all predict the way interest rates would move, economists would be out of a job! Variable rate loans
generally perform better over time. However, fixed rate loans provide certainty for both the borrower and the
banks and they could be a good option for people looking for security. Its best to look at all your options,
including a part fixed and part variable loan and decide whats best for you.
#19
#20
#21
If youve got less than a 20% deposit, you can still buy a property. In fact, many lenders will allow you to buy a
property with as little as a 5% deposit. However, if youre borrowing with less than 20% deposit or equity, Lenders
Mortgage Insurance (LMI) may be required. This insurance is arranged by the lender, but the premium is paid by
you. The insurance protects the lender in the event that you cant repay your loan. Sometimes the cost of LMI can
be included in the loan amount.
#22
#23
#24
#25
Everyone who has a variable rate loan is paying around the same interest.
If you do a quick review of the market, it reveals over a 2% difference in variable rate mortgages. Using a 30-year,
$400,000 loan as an example, the difference between 5% and 7% is over $500 per month! So its best to do your
homework even when refinancing.
You cant refinance because of credit card debt, even though youve got
equity in your property.
Lenders will focus on your ability to repay a loan and will take all debts into consideration. They will also look at
your repayment history. If you are struggling with cash flow, it might be a good idea to talk to an expert about the
options available to you.
#26
#27
#28
On a fixed rate loan you can only afford to pay the minimum and
nothing more.
An increasing number of lenders now allow repayment flexibility on fixed rate loan accounts. Usually its a set
percentage or dollar amount each year that can be repaid over and above the scheduled repayment without
penalty. Of course, make sure you check with your lender to see if this is possible for you.
You have to pay a broker to lodge and handle loan applications for
purchases or refinances.
The majority of brokers dont charge any fees because they are compensated by the lender. This doesnt affect
your interest rate or fees and can sometimes allow you to find a more competitive loan.
#29
#30
The loan that has the lowest interest rate is the best loan for you.
The best loan is one that best suits the borrowers specific financial goals and circumstances. You need to
consider not just the rate, but the loan features, such as total fees or comparison rate over the loan term,
and break costs for fixed rate loans, lenders criteria and if there are any limitations to the loan.
Get in touch with one of our Wealth Managers to see how we can help you.
Visit ybr.com.au/myths or call 1800 927 927