Surely you have heard that no words rhyme with orange and silver. Everyone knows that, right?
While knowledge of this will hardly help you buy or sell a house, or qualify you for a home loan, there are some other myths worth knowing about. In this post, we will discuss 3 home loan myths and help you understand what the truth actually is.
The importance of understanding these myths is to avoid making costly mistakes that can be difficult to rectify later. In all areas of life, we may be operating under certain presumptions that are actually not true. We want to make sure you make the right decisions when it comes to your home loan.
If you have further questions after reading this, we invite you to contact us so we can help you with your money matters.
Myth #1: The lowest rate is the best rate
Truth: The lowest rate might appear the most appealing, but there could be strings attached like higher fees and lower flexibility, or the cheap rate might only last for a short period of time.
First, work out what product type and features best suits your lifestyle and financial needs and objectives, and then focus on cost.
Myth #2: A fixed rate loan is better than a variable rate loan
Truth: Similar to the above, the fixed vs. variable decision simply depends on which type of loan best meets your needs. Fixed loans provide repayment certainty and can save you money if interest rates rise (or lose you money if rates fall). But they can also be costly to exit during the fixed rate term and they lack the flexibility of variable rate loans.
Myth #3: Paying the minimum loan repayment each month is the way to go
Truth: If you want to reduce your interest costs and get your loan paid off as fast as possible paying more than the minimum repayment each month is the way to do it. The interest you owe is calculated daily and charged according to your repayment cycle, so the more you pay off the more you’ll save, especially in the first few years of your loan. But, if this is a strategy you’re considering make sure your lender allows for repayments above the minimum or for lump-sum payments without penalty.
When you need any help in your money decisions, please reach out and contact us.