First home buyer myths busted

Have you heard about these first home buyer myths?

Buying a home and taking out your first mortgage is often the most significant financial decision you’ll ever make.

So, we understand the concerns you might be having about the process and what you need to do.

Remember, whether you’re buying your first home or your tenth investment property, it’s crucial to distinguish property market facts from fiction.

Let’s look at each of these in turn, shall we?

First Home Buyer Myth 1: “I need to clear my debt, before applying for a home loan”

Not true. Debt-free is not a requirement for your home loan. The important thing is that you can show your lenders that you can manage all your debt.

BeIng debt-free does give you more chances of getting a better loan agreement but it’s certainly not a pre-requisite

First Home Buyer Myth 2: “My parents cannot be my guarantor, or they might go broke.”

This is not the case. A guarantor is a third party to a home loan, and this can be anyone of your immediate family. They stand as additional security to help you get the loan.

Your guarantor is not the one who will have to pay the bank. Although, they would have to put collateral (be it their owner-occupied or investment property) as security for your loan. The only time your guarantor needs to pay the debt is if you default on your mortgage.

First Home Buyer Myth 3: “My bad credit will stop me from obtaining a home loan.”

A credit score may seem irreparable and it will definitely have an impact on your loan. But it doesn’t make the process impossible. Let’s have a chat about how your credit score may be impacting you. Best to know so that you can plan the right course of action.

First Home Buyer Myth 4: “You need a 20% deposit to buy your first home”

From our previous blog - How to reduce the cost for first home owners, we’ve already mentioned that this is not the case in some states. It is always good to have a decent amount of deposit, but you can still secure a loan with a 5% or 10% property deposit. Know that some additional conditions may apply, e.g. Lenders Mortgage Insurance.

First Home Buyer Myth 5: “Rent is cheaper.”

Renting is cheaper than buying only if you plan on staying in a home for 3 years, or less. If you don't plan on moving for at least 4 or 5 years then buying has many advantages over renting.

If you negotiate well you may be able to lower the purchase price of the house and in so doing, lower your mortgage as well, making it far more comparable to renting.

Sandcastle Finance can help you find the right loan through the right lender for your needs.

Book a free consultation