first home buyers common myths

5 First home buyer most common myths

Have you ever heard something like “You can’t buy a property in Australia until you become a citizen” or “Buying a house is too expensive, especially because you can’t do it with less than a 20% deposit”? Yeah, we’ve heard them all, too. 

Thanks to the wonders of the internet, first-home buyers are swamped with information about buying a property in Australia. The problem is, how do you know which resources and guides to trust? 

Working as Mortgage Brokers for more than 8 years, we deal with first-home buyers on a daily basis, and during this time, we have heard so many questions (and sometimes affirmations) that are not exactly true. 

So we decided to put together 5 of the most common myths we see among first-home buyers in Australia to help you understand the facts and take the following steps towards the property of your dreams in a much more conscious way.

First home buyer common myths

From tips and tricks to finding the best home loan on the market to understanding the fine print on your contract of sale, getting on top of your property buying knowledge can feel overwhelming. To keep you at the top of your game, let’s break down some common first-home buyer myths.

1 – “I can’t buy a house with less than a 20% deposit”

When it comes to first home buyers, many of them have the first misconception or misinformation regarding the deposit needed to buy the house. 

Some people think the minimum deposit should be 20% of the property value, but this is actually not true. Usually, first-time home buyers work with a deposit of only 5%, but this percentage may vary to 8%, 10% up to 20%. 

Over the years, more lenders have adjusted their product offerings to accommodate borrowers of all financial backgrounds. With property prices rising and wage growth slowing down, saving for that 20% deposit has become all the more difficult. Fortunately, many lenders now permit borrowers to apply for a home loan with a deposit below the 20% mark.

However, the one thing to be aware of when paying a deposit lower than 20% is the Lenders Mortgage Insurance that your lender might require to minimise the risk of lending money to someone with little savings. In this case, fees will vary according to the property’s price and how much deposit you are putting down. 

If you want to learn more about the deposit, please check our other article on “How much deposit do I need to buy a house in Australia?” or talk to us to understand calculations and your ideal deposit amount.

2 – “I Should Avoid Fixed Rates”

Fixed vs variable rates, what’s the better option for first-home buyers? It’s a common question we often hear, with many first-home buyers opting to avoid one rate type altogether. Thinking that you should avoid fixed-rate loans is a common myth among first home buyers, but it actually gives you much more pre-visibility.

Although there are some down points — such as restricting additional repayments, which will limit your possibilities to pay off the loan faster — fixed interest rates are actually an excellent option for those who need stability and want to get the budget under control.

Choosing a fixed interest rate means that you could save money in the future once your repayments won’t vary throughout the fixed period, which usually goes from one to five years. And for a first-home buyer, knowing your repayment amount every month until you get your footing can give you peace of mind.

3 – “Being pre-approved is a guarantee to buy any property”

Urgh, nope! The pre-approval is an agreement from the bank stating that they are willing to lend you a certain amount of money to buy a house. This is one of the most important steps to take when planning to buy your first home because it allows you to know your maximum available funds, organise your budget and focus on inspecting houses you can afford. It also shows a seller how serious you are about purchasing the property and can boost your chances of getting the deal across the line.

However, although this is a crucial arrangement, the pre-approval actually does not guarantee loan approval. This is only an initial agreement that will require a much more complex process before being pushed into a written document, which will finally start your home loan process. 

4 – “I can’t buy a property in Australia if I’m not a citizen”

This is another first home buyer common myth!

Permanent residents not only can buy a house in Australia, but they also have pretty much the same benefits and requirements as Australian citizens do. First-home buyers are eligible to borrow up to 95% of the property’s value and access many Government grants.

Does this mean there is no difference at all between being a Permanent Resident and an Australian citizen when it comes to government grants?

No. Actually, there are two minor differences, but they won’t change much:

  1. The Home Builder Grant, created to help Australia’s economic recovery after the Pandemic, only applies to Citizens. Nevertheless, this benefit is set to end on 31/12/2020.
  2. The First Home Loan Deposit Scheme, which allows only a 5% deposit without paying for the lender’s mortgage insurance, is also an exclusive benefit for citizens. However, there are only 10,000 grants per year for the whole country.

Having said that, every time someone asks us if they should wait to get Australian citizenship to buy a house, our answer is no. It is not worth waiting, given that the benefits are pretty much the same. 

We also recommend you to read our article on Buying a house in Australia as a permanent resident: requirements and benefits to learn more.

If you are a permanent resident and want to start this journey towards buying your first house in Australia, talk to us. We have helped more than 210 migrants to achieve that dream too!

5 – “A Mortgage Broker will cost too much”

Now you know we had to set the record straight on this one. Mortgage brokers act as intermediaries between lenders and borrowers to help the buyer find the best home loan to fit their needs. In other words, we do the hard work looking at all policies and requirements from each one of more than 30 lenders to choose the right place for you to borrow from or get your pre-approval. 

If you’ve never had to choose a home loan before, it can be a little tricky to get your head around. Between interest rates, fees, loan features and more, knowing which one is right for you can be overwhelming. Working with a professional mortgage broker, like Capta Financial, can ensure you receive the best home loan for your circumstances.

And here is where some people start thinking, “so this might be a costly service, right?” 

Wrong, this is a myth as well!

Generally, mortgage brokers are paid by a commission on loans settled by the lender, which means you won’t pay a single cent to talk to us! Capta Financial does not charge anything additional to the client at any point and will rely solely on the commission received by the bank. With us as your trusted mortgage broker, what you see is what you get with our services.So what are you waiting for? Contact us today, we’re here to get you started on the journey to property ownership. At Capta Financial, we guide you through your financial journey in both languages, English and Portuguese, to help you find the most suitable lender for your needs.

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