7 Australian Mortgage Myths That Cost You Thousands
7 Australian Mortgage Myths That Cost You Thousands
Labels: Australian Mortgage, Refinancing, Myth Busters, Offset Account, Loyalty Tax
Now that you are armed with advanced financial strategies, it's time to tackle the pervasive misconceptions within the Australian property market. These myths lead countless homeowners to pay significantly more interest than they should.
These beliefs often stem from confusion or financial inertia. We're going to bust 7 common mortgage myths you must fix immediately to avoid paying the costly "Loyalty Tax."
Myth 1: Refinancing is too difficult and expensive.
The Myth:
I've been with my bank for years; moving is too much hassle and the costs outweigh the benefits.
The Reality:
Refinancing costs (setup fees, valuation costs) are often offset by competitive **"Cashback Rebates"** offered by new lenders (often \$2,000 - \$4,000). The long-term interest savings are substantial, and a mortgage broker manages almost all the required paperwork for you.
Myth 2: I must be loyal to the Big Banks for security.
The Myth:
The Big 4 banks are safer and more stable than smaller competitors. I should pay a little extra to keep my relationship with them.
The Reality:
The Big 4 often charge a **"Loyalty Tax"** to long-standing customers, offering significantly higher rates than smaller Non-Bank Lenders or Credit Unions. All regulated financial institutions in Australia are secure. Choosing a lower interest rate is always the most financially prudent choice.
Myth 3: The Offset Account is too complicated.
The Myth:
I don't understand how an Offset Account works. It's too complex compared to a standard home loan account.
The Reality:
An Offset Account is a transactional bank account linked to your mortgage. Interest is calculated on the **net debt** (Loan Balance minus Offset Balance). It is the simplest and most powerful tool to reduce interest, as your cash remains accessible at all times.
Myth 4: I can't refinance because I'm on a Fixed Rate.
The Myth:
I'm locked into a Fixed Rate contract, so I cannot switch lenders until the term ends.
The Reality:
You can always refinance, but you will incur **"Break Costs"** (a penalty fee). However, if you have less than 12 months left on your fixed term, or if current market rates are significantly lower, a broker can calculate if the long-term interest savings justify paying the penalty now.
Myth 5: I can safely use the Redraw Facility for personal expenses.
The Myth:
I'll put extra money into my Redraw facility and pull it out for personal spending when I need it.
The Reality:
For **investors**, this risks **"Debt Tainting."** The interest on funds redrawn for personal use is NOT tax-deductible, complicating your tax returns and potentially costing you thousands. Always use a dedicated **Offset Account** for non-investment funds.
Myth 6: Using my credit card often improves my Credit Score.
The Myth:
I should keep using my credit card frequently to keep my credit score high.
The Reality:
Lenders assess the **total credit limit** you possess (regardless of whether you use it) as potential debt, which drastically **reduces** your Borrowing Capacity. If you have unused credit card limits, consider reducing or canceling them before applying for a new mortgage.
Myth 7: Successful property investment must involve Negative Gearing.
The Myth:
Every successful property investor must operate under Negative Gearing (expenses > income) for tax purposes.
The Reality:
Negative Gearing is a temporary tax strategy. The long-term goal should be **Positive Gearing** (income > expenses) to generate positive cash flow. This not only increases your weekly income but also improves your borrowing capacity for future investments.
STOP BELIEVING THE MYTHS AND START SAVING MONEY!
If you are currently trapped by even one of these myths, you are likely overpaying thousands in interest. Correcting these mistakes requires specialized knowledge.
Consult an Expert Mortgage Broker to Fix Your Strategy Now(Click to access our trusted affiliate platform and find an investment-focused broker for free.)
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