BORROWER MYTHS DEMYSTIFIED
At Blue Key Finance, we've heard plenty of legitimate questions which take their origin from BBQ conversation. You hear a friend say something at a BBQ and you hold on to it as true. We're going to demystify these popular myths once and for all.
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A bad credit history doesn't matter if you eventually pay it off
Not only do lenders conduct a credit check to verify your recent 5 years of credit history but they will ask for statements from all your current debt commitments. You will find it hard to obtain a preapproval if you currently show you cannot manage debt.
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Assets are the same as income
Assets are items you own. Income is money paid to you for a service that you have provided or from earnings received from an investment. When lenders look at your loan application, they will look at the income you earn and your age and expect a certain total value of assets that you should have accumulated by now.
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It's the credit card balance, not the limit, that counts
To improve your chances of obtaining finance through a mainstream lender reduce the number of credit cards or card limits you have. Lenders look at your maximum limit, not what you owe - the bigger the limits the less you can borrow.
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You need a 20% deposit to get started
This requirement was set in the old days. Now with mortgage insurers present, Banks can provide you with finance even up to 100% of the value of your property.
A home loan with a 0.05% lower interest rate than a home loan product better suited to your needs is not the best. You need to take into account features like fixed vs. variable, a split facility, professional pack vs. a basic variable, flexibility in paying it off sooner, and an offset account to name a few.
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A fixed rate is always safer than a variable rate
What if fixed rates were to drop after settlement of your loan? What if your plans changed during the fixed rate term and you want to sell your home or refinance, break costs can be expensive.
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100% finance loans require no money upfront
The Bank will lend you money up to the value of the property you want to buy. However, you need to come up with money to pay for the costs associated with this purchase. Costs like stamp duty, mortgage insurance, and loan application fees to name a few.
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Mortgage insurance protects the borrower
Lenders Mortgage Insurance (LMI) does not protect the borrower should they be unable to make mortgage repayments. It protects the lender from any losses resulting in the sale of a property due to default by the borrower. The one-off LMI premiums are payable by the borrower when the amount borrowed is above a certain percentage, usually 80%, of the lender's valuation of the property.
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Home loan offset accounts save you money
Many of you are opting for an offset account that costs up to 0.06% more but deliver marginal benefits. Offset accounts only deliver real benefit if you maintain a large savings balance.
Visit our FAQ's for our detailed acnswers on more of your common questions. At Blue Key Finance we take pride in taking the time to provide you with sound advice before you make one of the biggest decisions in your life.