Like Nessie, there are property myths too š
When Applying for a home loan, there are a few myths...Let's bust them š
1. You need a 20% deposit to buy a property š¤
If you have less than a 20% deposit, you can still buy. Some lenders will allow you to buy with as little as 5%. However, if youāre borrowing with less than a 20% deposit, Lenders Mortgage Insurance may be required.
2. You must have a deposit to get a home loan šø
If you don't have enough deposit but do have the ability to make the required home loan repayments, a guarantor (such as your parents) could help you.
With your parentsā help, you can borrow 100% of the purchase plus purchase costs (Like stamp duty, solicitor fees etc).
NOTE: A guarantorās ability to borrow will reduce after they have agreed to act as a guarantor. I recommend they seek independent financial and legal advice first.
3. It doesnāt matter how many credit cards I have, as long as they are paid off š³
When it comes to credit cards, your total credit card limit will be assessed, even if you donāt have any money owing on it. Lenders assume that a credit card is used up to its limit even if it isn't. If you have a credit card with a $0 balance AND you donāt use it, cancel it.
If you must then keep one, then reduce the limit as much as possible. It will improve your borrowing power substantially.
4. Paying fortnightly will save a fortune š°
Youāre actually making extra repayments if you pay fortnightly as there are 26 fortnights in a year compared to the 12 monthly repayments, meaning two extra repayments per year if you pay fortnightly.
Through those extra repayments, you can pay off your mortgage faster and save heaps on interest. You can pay monthly and just make extra repayments to get the same effect.
Parts 2 & 3 to follow...
If you donāt have a mortgage broker or are looking for a second opinion, please feel free to call on 0417 292 780 or email morgan@fullcirclefinance.com.au
