Debunking 5 common home ownership myths

To make things easier for home buyers, we have compiled a list of some of the most common home buying myths to help prospective home owners get to grips with the market.

There are numerous misconceptions about purchasing property that are commonly held as factual when they are not, so it pays to have as much knowledge surrounding the home buying process as possible.

Myth 1: You need a 20% deposit

Years ago, this would have been the case. Nowadays you can now obtain a home loan with a deposit with as little as 5 per cent.

If you do not have a 20 per cent 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 will be passed on to you from the lender and can be folded into your loan or a payment can be made upfront. This gives you the freedom to buy your property sooner as you do not need to continue saving to reach a 20 per cent deposit.

Helia’s LMI Toolkit contains tools and resources that may assist you to better understand Lenders Mortgage Insurance and the mortgage market. Among the resources are case studies, fact sheets and videos that explain what Lenders Mortgage Insurance is and the process of buying a home.

Myth 2: You only need to save for a deposit

A deposit will be your largest upfront or initial expense when buying property.

However, the costs of buying a home add up far beyond the deposit. In fact, they will sometimes equal a similar amount to the initial deposit.

The additional costs you may incur will vary by the State you reside in, but some common additional expenses will include strata, council rates, stamp duty and utility rates.

Myth 3: Your credit card debt will be the only thing assessed by a credit check

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

However, building an accurate depiction of your history will go way beyond your credit card or loan history, and include other elements such as your tertiary study debt (HECS/HELP for example) and your history with buy now, pay later (BNPL) services.

Buy now, pay later services, such as AfterPay, are an increasing hidden cost as defaulting on these payments affects your credit score. Most people do not think of these services as a debt, so may not realise that this can be what stands between them and an approved home loan.

Myth 4: Renting is cheaper than buying

Buying a property has been a part of the Australian dream for a long time, but is renting cheaper than buying?

Property is a good investment to make, 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. Using the Helia Buy or Rent Calculator default simulation, a home buyer purchasing a $500,000 home in Queensland with a 10 per cent deposit will be better off over their 30-year mortgage by $1,092,656.82. For this home buyer, they were able to buy their own home 102 months sooner than if they had saved for a 20 per cent deposit.

Myth 5: A real estate agent will find you the best deal

A real estate agent’s job is to create demand for the properties of their clients (the vendor), and try to get the best deal possible for people selling their homes.

As such, it is important for buyers to remember that real estate agents will find deals that are more beneficial to the seller, although they provide help to prospective buyers by showing them a range of properties.

Buyers looking to get 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.