Sorting Fact from Fiction: Eight Common Real Estate Misconceptions
Purchasing a property can be a complicated process so it’s no wonder that there are so many myths and false facts floating around. Regardless of whether you’re looking for a home to live in, or you’re interested in investing, we’re here to help you sort fact from fiction before you make that big decision
1.
Fiction: COVID has made it a bad time to purchase.
Fact: Recent research from ING has revealed that many Australians consider now a great time to invest, and with interest rates at a record low it’s not hard to see why. Housing prices are still lower than they had been before the pandemic, so it’s a prime time to take advantage of the state of the market for those with the means to do so.
2.
Fiction: Choosing the right time to buy is more important than anything else.
Fact: Many factors determine whether or not you should buy, but relying on property trends is only one of them. Good deals don’t only come at certain times of the year – keeping an eye on the property market long term will have you much more likely to catch a rare bargain.
3.
Fiction: Bank valuations are usually lower than the true value of the property.
Fact: Property valuations, whether through a bank or otherwise, are done by trained professionals working with predetermined criteria to determine the true value of the property. In almost all cases the valuation will return within expectations.
A valuation report can be challenged in court if need be, so any valuation must be able to be justified with current market data.
4.
Fiction: If you want to increase the value of your property, renovation is a surefire way to do so.
Fact: While renovating can add value to your home, it’s important to keep in mind that added worth isn’t guaranteed. Even if your property value is higher, the cost of the renovation may outweigh the value gained. Do some research to make sure you’re best informed about current trends and styles, and be smart about your renovation spending to get the most out of your efforts.
5.
Fiction: You must have a 20% deposit to buy a property.
Fact: While borrowing with less than a 20% deposit may net you some extra costs in the form of LMI, it is by no means impossible. There are even rates available that allow you to borrow with a 5% deposit!
If you’re buying your first property you may be eligible for the First Home Buyers Scheme, allowing you to purchase your home with as little as a 5% deposit without having to pay LMI.
6.
Fiction: Going with the lowest rate will get you the best deal.
Fact: A home loan is more than just an interest rate, and depending on your circumstances the lowest rate may not be the best suited to your situation. This is where a mortgage broker can come in handy when helping you choose a loan – these trained financial experts can help you consider any other important factors in your decision making (such as the comparison rate, overdraft, total fees, and repayments).
7.
Fiction: Managing your loan by making minimum monthly repayments won’t make much difference overall.
Fact: Home loan interest is calculated daily but charged monthly, which means more frequent payments lead to you paying less interest over the loan term. This can make a big difference in the life of your loan. You can use our repayment calculator to see how much you could save.
8.
Fiction: If you want to refinance, you better be prepared to pay for it.
Fact: Refinancing can actually save you a great deal of money over the life of your loan. There are usually some fees involved – such as application fees or stamp duty – but the savings overall often make these costs worth it.
You’ll need to be aware of any break fees if you’re currently on a fixed rate though; usually the best time to refinance is after your fixed period has ended. Potentially, a $300,000 loan with a term of 30 years and an interest rate of 3.65% p.a. refinanced at a rate of 1.88% p.a. can lead to savings of $139 per month and up to $49,955 over the loan term with just minimum repayments.
