Busting 5 myths about home buying

Buying a home can be an expensive and stressful experience. Regardless of this, there are many myths surrounding home buying that people relate to when they probably shouldn’t.

Have a read of our list of 5 common home buying myths below, so that you can move forward and start seeing just how affordable home ownership really is!

1: Your down payment needs to be at least 20%

While this may have been true in decades past, time have changed. You can now obtain a home loan with a deposit with as little as 5%.

If you do not have enough savings for a 20% deposit, the bank may take out Lenders Mortgage Insurance (LMI)¹ on your loan, which is an insurance policy that your lender takes out to protect itself against the risk that you (the borrower) default on your loan repayments. As a buyer, the premium fee is passed on to you from the lender and can be capitalised into your loan or paid upfront. This gives you the freedom to buy sooner as you do not need to continue saving to reach a 20% deposit.

Why not check out Helia’s LMI Toolkit? It contains all the tools and resources you need to understand both the mortgage market and Lenders Mortgage Insurance. The toolkit contains numerous resources, including: fact sheets, case studies and videos that explain both the process of buying a home, and what Lenders Mortgage Insurance is.

2. A deposit will be the only thing you’ll need to budget for

It is true that the largest initial or upfront expense you will need to save for will be your deposit. However, costs of purchasing your home will add up far beyond the deposit, sometimes equalling an amount that is similar to the initial deposit.

Additional costs vary depending on which State you reside in, but the most common additional expenses will include council and utility rates, stamp duty and strata.

3: Your credit score is dictated by your credit card

An important factor for lenders when considering whether to give potential buyers a home loan and how much they are willing to lend is their credit history.

This history goes beyond credit cards or loan history, it includes tertiary study debt, such as HECS/HELP and buy now, pay later (BNPL) services.

Buy now, pay later services are an increasing hidden cost as defaulting on these payments will have an effect on your credit score.

Also, most people don’t think of these services as a debt, so may not realise that this can be what stands between them and an approved home loan.

4. Renting is cheaper than buying

Since the early 20th century, buying a property has remained part of the Australian dream, but is it cheaper to rent than to buy?

Property is considered a good investment as there is a variety of government grants and tax breaks for owners. The low interest rates are making the cost of interest payments on a mortgage more affordable than ever before.

Remember you can use Helia’s Buy or Rent Calculator to see how the numbers stack up, and whether it is better for you to purchase a home now, later or continue renting.

5: You can only find the best deal through an agent

Buyers who want an expert on their side should source a buyer’s agent, or a mortgage broker to get help understanding the property market and find their future home.

The job of a real estate agent is to create demand for the properties of their clients (the vendor), trying to get the best deal possible for people selling their homes.

It is therefore important to remember that real estate agents will find deals which are better for the seller, even if they do help prospective buyers by showing them a range of properties.