Lately I’ve been doing some Q&As with Balmain locals, answering
their questions about mortgages. I’ve noticed a number of mortgage myths and
misconceptions that keep coming up, so I thought I’d address the 8 most common:
1. Once I find a
good rate, I’m sorted for the life of my loan. Lenders can move their variable
mortgage rates at
any time, so a loan that’s competitive today might not be competitive in the
future. It is a good idea
to visit your mortgage broker once a year to get a review and see if your rate
is still competitive.
2. It’s not worth refinancing a mortgage for
an improvement of half a percent. If you have a $350,000, 30-year loan with
an interest rate of 5.24 per cent, and you refinanced to a rate of 4.74, you
would save $107 a month and $38,480 over the life of the loan. The average mortgage in Balmain
is much larger then this so you could image the possibilities!
3. A competitive
rate doesn’t really matter because the Reserve Bank controls home loan rates.
The RBA adjusts the cash rate from time to time but each lender can change
their rates as they see fit.
4. I can’t
refinance a fixed-rate loan. Not true. You can refinance a fixed rate loan
but you’ll be hit with a break cost, which is compensation for the loss the
bank will incur when you leave. Weigh up the break costs versus the potential
savings and see what you come up with. As your local mortgage broker in the Balmain area, I can
easily do these sums for you and see if you would come out ahead.
5. I want to use a
mortgage broker but what about the fees? Mortgage broking fees are paid by
the lender, not by you. A mortgage broker finds you the best loan at the most
6. I’m too old to
refinance my mortgage. Age discrimination is illegal. A bank looks at your
repayment ability, so they’re looking at your income and the loan term. If
you’re close to retirement, you can look at shorter loan terms or alternative
7. Many locals in Balmain are self
employed or business owners and say they pay a higher mortgage rate because of
this. If you’re self-employed and can’t produce your tax returns,
you may be offered a low documentation loan which can have higher interest
rates. If your financials and tax returns are in order, you qualify for the
same rate as a regular PAYG employee.
8. Banks keep
secret files on my credit history. Wrong. All lenders use a credit
reporting system to check your history. Know what they know by finding out your
history at www.mycreditfile.com.au.
Candrick’s Top Tip:
is the key to getting the best deal. If you need any advice, as your local
Yellow Brick Road Balmain broker, I can understand your situation and get you
on the right track.