Finances, home loans . . . it can all seem a bit complicated and overwhelming.
But it doesn’t have to be.
Mark Bouris and the team at Yellow Brick Road Wealth Management have tackled seven of the most common financial myths, and bust them.
Myth: It’s not worth refinancing for a rate only 0.5 percent lower than your current rate
Depending on your loan size, refinancing can be very worthwhile. For example, if you have a $400,000, 30 year loan and your rate is 5.5 percent, switching to a 5.0 percent rate could save you nearly $125 per month or nearly $45,000 over the life of the loan.
Myth: There’s no difference in paying monthly or fortnightly loan repayments
There are often more than four weeks in a month, which means that fortnightly payments could allow you to pay off your loan faster. Using a 30-year, $400,000 loan on a five percent interest rate, monthly payments would equal $2,147.29. If half of this payment were made fortnightly, you’d be looking at a loan term reduction of almost five years and over $68,000 in total interest saved.
Myth: Banks don’t like lending to single people
Quite simply, if a person can afford a loan on one income, and if all other usual 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.
Myth: The bank you’ve been with for years won’t give you a loan, then no other bank will
Banks have different policies and different lenders focus on different criteria. Often a mortgage broker can help you find a loan that suits your individual needs.
Myth: You’re too old to get a 30 year loan to refinance your mortgage
It’s illegal to discriminate against someone based on their age. Shorter loan terms or other exit strategies need to be considered, but you can’t be turned away just because of your age.
Myth: It’s not wise to borrow outside the safety of the big four banks
Many smaller lenders have more competitive rates and flexible terms than the major banks. With the Federal Government banning exit fees, it provides consumers with greater power and choice to refinance to a better deal.
Myth: It costs more to deal with a mortgage broker than a bank
Getting a loan through a broker generally costs the same as dealing directly with a bank because any commission that a broker receives comes directly from the bank, not the borrower.
Mark Bouris is the Executive Chairman of wealth management group Yellow Brick Road.