When it comes to buying a home, one of the biggest decisions you’ll make is financing. Understanding the ins and outs of mortgages can be complicated, and there are plenty of myths floating around that can lead to confusion. In this blog, we’ll be debunking some of the most common mortgage myths to help you make informed decisions about your home purchase.
Myth 1: You Need a 20% Deposit to Buy a Home
This is one of the most persistent mortgage myths out there. While putting down a 20% deposit can lower your monthly payments and can help you avoid paying lenders mortgage insurance (LMI), it is not a requirement. Many lenders are able to offer loans with varying deposit amounts with different interest rates and in some cases you’ll need to pay for LMI.
Myth 2: A 30-Year Mortgage is Always Better Than a 15-Year Mortgage
While a 30-year mortgage may have lower monthly payments, it also means paying more in interest over time. On the other hand, a 20 or 15-year mortgage may have higher monthly payments but will result in paying less in interest over the life of the loan. It’s important to consider your long-term financial goals and what you’re comfortable with when deciding between a 30-year, a 20-year or a 15-year mortgage.
Myth 3: You Should Always Get a Fixed-Rate Mortgage
Fixed-rate mortgages are great if you want stability in your monthly payments, but they may not be the best option if you plan on selling your home in a few years or if you think interest rates will go down. In these cases, an variable-rate mortgage may be a better option as it can start with a lower interest rate that adjusts over time.
The type of rate you select will probably depend what is happening within the broader housing and financial market at the time you apply for the loan.
Myth 4: Pre-Approval Guarantees a Loan
While pre-approval is an important step in the home buying process, it is not a guarantee that you’ll get the loan. Your lender will still need to verify your financial information and the value of the property you’re buying. Additionally, your financial or employment situation can change after pre-approval, which can impact your ability to get a loan.
In conclusion, it’s essential to educate yourself about the mortgage process and to separate fact from fiction. Don’t let these common mortgage myths prevent you from achieving your homeownership goals. If you have questions or need clarification on anything mortgage-related, don’t hesitate to reach out to a professional mortgage broker for guidance.