It’s easy for Australians to get confused when it comes to mortgages, so we are going to smash some of the most common mortgage myths right now.

It’s not worth refinancing a mortgage for an improvement of half a per cent
If you have a $350,000, 30-year loan with an interest rate of 4.5%, and you refinanced to a rate of 4.0%, you would save $102 a month and $36,900 over the life of the loan. Is that worth it to you?

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.

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 competitive rate.

Once I find a good rate, I’m sorted for the life of my loan
Lenders can move their variable rates at any time, so a loan that’s competitive today might not be competitive in the future. Take a look at your loan every year or two.

It doesn’t matter if you pay your loan monthly, fortnightly or weekly
False. A 30-year, $350,000 loan on a 4.0% interest rate would mean monthly repayments of $1,670.95. If you paid half ($835.48) fortnightly, you’d take four years and one month off the life of your loan, and save over $39,468 in interest. Weekly payments are even better!

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 exit strategies.

Self-employed people pay higher interest
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.

You can tell a competitive mortgage by its interest rate
Not always. Set-up and exit costs and ongoing fees can add to the expense of a loan. When comparing mortgages look at the “comparison rate” which takes all fees, costs and introductory rates into account.

If your bank won’t give you a mortgage, no lender will
Actually, all lenders have different policies and criteria. Often a mortgage broker can match you with the right lender and a better product.

Lines of credit are too expensive
Some Line of Credit facilities can attract a slightly higher rate because they offer flexibility for personal credit. However, a word of caution — lines of credit are not suited to all borrowers, especially those who have difficulty budgeting or who lack financial experience.

It’s not wise to borrow outside the big four banks
During the GFC, the government guarantee of bank deposits prompted this myth. But the guarantee extends to deposits, not loans. Some of the best deals are from smaller lenders, and now that the government has banned exit fees consumers have the power to refinance to a better deal.

Credit defaults or bankruptcy disqualify me for a home loan
There are home loan options available for people with adverse credit histories. It’s best to be upfront with your broker and see what’s available — you may be surprised at the outcome.

Special introductory interest rates are the best deal
Lenders often use discounted, introductory or honeymoon offers to attract customers. But once the special rate is over, the loan often reverts to a much higher interest rate. Always look at a lender’s comparison rate — it tells you the long term cost.

Banks don’t like lending to single people
If a person can afford a loan on one income, and if all other credit criteria are met, then a loan is just as likely to be approved for a single person as it is for a couple with two incomes.
As always, collect as much information as possible, ensure you know your own goals, and if you’re confused consult an expert who works with loans day in, day out, and can help with your enquiry.