5 Common Mortgage Myths Debunked

There are plenty of mortgage myths out there that can stand in the way of budding property investors achieving their dreams. These myths can spread like wildfire – resulting in investors making poor decisions that can have a detrimental effect on their investment prospects.

Property Club is sharing five of the most common mortgage myths so that you don’t ever feel wrong-footed when paying back a home loan to a lender. From finding the right lender to how much a bad credit rating truly affects your chances of obtaining a home loan, here are the mortgage myths that you shouldn’t take as gospel truth.

1. You Can Only Get a Mortgage from Your Bank

This is a common mortgage myth that gets shared around too often. However, while every lender has different criteria and policies, it is important to know that your bank is not the only type of lender who will offer you a mortgage.

By working with a mortgage broker from Property Club, you will have access to as many as 20 lenders to choose from. Picking the right lender for your needs depends on a range of factors, which we can guide you through during this critical decision.

2. A Bad Credit Rating Restricts You From Borrowing

If you are a property investor with a poor credit rating, it can be easy to feel like you have no chance of a lender offering you a home loan. However, while a bad credit rating does make the process of borrowing difficult, it does not mean it is completely out of reach.

Communication is key in these situations, and telling your story to lenders may increase the chances of them sympathising with your predicament. Building trust and respect with a lender is only going to help you get the mortgage you need for your property investments. There are also certain lenders who specialise in helping those with a poor credit rating.

3. You Can Borrow More Money if you Pay Off Your Credit Card

Some people believe that paying off their credit card debt will increase their borrowing capacity from a lender. This is not true. Lenders only look at a person’s credit card limit, and not the amount owing, when calculating the borrowing amount.

If you do want to increase your borrowing capacity, then consider reducing the limit on your credit card, or cancelling it outright.

4. You Should Not Borrow Outside the Big Four Banks

This myth has its roots in the global financial crisis, when the Australian government guaranteed deposits from the big four banks – Westpac, CBA, NAB, and ANZ. However, this only ever covered deposits, not loans, and in truth, there are a number of highly reliable smaller lenders that you can choose from.

5. Pre-approved Loans Guarantee Money

A pre-approved loan is only an offer from a lender to lend money, not a guarantee. There are a number of contributing factors that a pre-approved loan is subject to before any money is lent out.

These include:

• Property valuing up to purchase price
• Documentary verification
• May only be valid for a three-month period

A pre-approved loan is certainly a step in the right direction, but don’t rest on your laurels just because you have one. Ensure you are still ticking all the boxes to give yourself the best chance of eventually obtaining the home loan.

Join Property Club Today

To debunk more mortgage myths and learn about the best way to obtain a home loan, consider becoming a member of Property Club today! Contact our friendly team at enquiries@propertyclub.com.au.