Lending Hand Finance - Home Loans (First Home Buyer Myths)

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Eight First Home Buyer Myths

Myth 1 - A 100% home loan means no money up front.
Applying for a 100% home loan does require you to have funds to complete the purchase. A lender has nothing to do with fees such as, conveyancer costs, council rates, registration of title, stamp duty etc. In most cases these fees will add up to approximately 5-6% of the purchase price. These fees are unavoidable and your lender will not fund this portion to you.

Myth 2 – Lenders Mortgage Insurance protects the borrower.
No, not true. Lenders Mortgage Insurance (LMI) is there to protect the lender only. When you borrow over 80% of the property value, the lender and the Mortgage Insurer are both taking 'higher' risks. Borrowers normally fail to understand that LMI is always paid, but when you borrow over 80% they make you pay for it.

Myth 3 – Personal debts can be rolled into the mortgage.
Yes they can be, once you have equity. How do you obtain equity? Equity is acquired by holding onto the property and it growing in value, or by making extra home loan repayments. Most lenders will lend a maximum of 90% of the value of a property for refinancing/debt consolidation. If you have borrowed 95% for instance, chances are it might take a few years to have enough equity to consolidate personal debts.

Myth 4 - Assets and income are the same thing.
No. It really doesn’t matter on the strength of your asset base, if you do not have the income to support the debt you will not be funded the money. Having the right income also means being employed for a certain amount of time, or even within a certain industry for many years. The lender will look at your asset base, but that is not how they work out how much you can borrow.

Myth 5 – I have a credit card, but I only owe….
It does not matter what you owe on your credit card as almost all lenders will look at the credit card limit. Therefore, if you have a $10k credit card, and only owe $1k it might be worth reducing the limit. Reducing the limit will have a big effect with your borrowing capacity.

Myth 6 – You need 20% deposit.
These days you can borrow up to 100%, so there is no need to come up with a 20% deposit. But if you can come up with that sort of deposit then you will save on Lenders Mortgage Insurance. If not, then don’t feel bad as there are few people that have a spare $60k sitting in their back pocket.

Myth 7 – Better to go with a fixed rate.
Often fixed rates are much less flexible then the variables. So often it is not always a wise decision to go fixed. Remember everyone's situation is different - so do not listen to your friends or family as they may be on different income, have different debt levels etc. This is a topic that needs to be discussed in length with your Personal Mortgage broker at Lending Hand Finance.

Myth 8 – A bad credit history won’t matter if I have paid the debt.
Think again. Regardless of whether you have paid this debt or not, it all counts. Remember everything goes onto your credit report and will sit there for a minimum of 5 years. A lender will not ignore bad credit history, especially if you want to borrow a high percentage of value. It is best to speak with Lending Hand Finance before you begin looking for a property, as a small blemish can cause you issues.

Did You Know?

We can assist First Home Buyers buy their own home.

Contact Lending Hand Finance on
1300 850 545 or

Mortgage & Finance Association of Australia

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There are misconceptions and our role is to clarify finance for: renovations, owner builders, construction, the self employed, bad credit ratings, low document loans. We also assist with: first home buyers, how much can I borrow?, 100% home loans, investments, reverse mortgages, no application fees, pre-approvals, full approvals, debt colsolidation, off-set accounts, redraw facilities, no deposit home loans, and refinancing for equity.