There's no doubt about it - buying your first home will likely be the biggest financial investment you've ever made. It's both a scary and exciting time, but it's always one where people tend to bust out the many myths and misconceptions about real estate and getting started on the property ladder. Following are some of the most common home buying myths dispelled.
#1. A Need a Deposit of at Least 20%
As a general rule, the higher the deposit you have, the better. The more you can pay towards a new home before borrowing the rest by way of a mortgage, the less you'll have to pay in monthly installments. Nonetheless, while a deposit of 20% or greater is definitely preferable when it comes to buying your first home, it is possible to obtain a mortgage by putting down less. However, it's generally best to avoid buying property if you can't pay at least 10%, lest you could end up owing more money to the bank than the house is worth, should property values fall.
#2. The Deposit Is the Only Major Cost
The deposit will almost certainly be your single biggest expense but, unfortunately, that's not where the expenses stop. There are many hidden costs of buying a home that can add substantially to the final amount. Aside from more obvious expenses, such as monthly mortgage payments, there are also home inspection and conveyancing fees, property tax, transfer of utilities and buildings insurance to think about.
#3. The Lowest Interest Rates Are Always the Best Deal
The cost of your monthly mortgage repayments is dictated by the length of the mortgage (typically 20 or 30 years) and the interest rate. While you might instinctively be drawn to the lowest interest rates you can find, this does not necessarily mean getting the best deal. Your mortgage lender can help you understand all of your options.
#4. Buying Is Always Preferably to Renting
There's obviously no substitute for owning your own home rather than paying rent every month and being subject to the rules and regulations laid down by a landlord. However, buying isn't always better than renting. In fact, it depends on the current property market. In some markets, such as those with high interest rates or inflated property values, it can actually be a lot more expensive to buy property than rent one. This is particularly likely to be the case if you buy a fully renovated property at a high market price.
When you're thinking about buying your first home, the first thing to do is thoroughly familiarize yourself with the local market and its recent history. Ultimately, you need to educate yourself in order to determine whether or not it's the right time to buy or if it's preferable to continue renting for a while longer. If, however, you're ready to go ahead and apply for a mortgage, you'll likely find it much easier to seek the help of a mortgage lender who will track down the best deal on your behalf. We would love to help you find your best deal here at i-bank!
