Home Loan Myths Busted: 10 Mortgage Questions You Might Be Getting Wrong
What You Really Need to Know About Home Loans
When it comes to getting a home loan, there’s no shortage of advice — but not all of it’s accurate. In fact, some of the most common beliefs I hear from first-home buyers (and even some seasoned property owners) are NQR (not quite right).
So let’s clear the air and bust some of the biggest mortgage myths I come across, one by one. Whether you're looking to get into the market or just want to understand how it really works this guide is for you.
1. Do You Really Need a 20% Deposit for a Home Loan?
No. In fact, many buyers can purchase a home with far less. Double-in-fact, I find that it’s rare for people to enter the market with a 20% deposit, let alone a 10% deposit.
Between government schemes, guarantor loans, and even deposit loans from select lenders, you could get into the market with as little as 5% — or even 0% out-of-pocket in the right situation.
It all comes down to the strategy and structure you use. I wrote a little bit more about this in my last blog.
2. Will Paying Down Debt Increase Borrowing Capacity?
Not always - actually, not at all. But…
The key here is that a debt needs to be ‘paid off’ or the ‘loan limit’ needs to be reduced to increase your borrowing capacity.
Lenders don’t assess how much you owe — they look at your repayments.
This applies with HECS/HELP too. Given that your HECS/HELP debt repayments are based on your income, the actual amount you owe isn’t factored in. It’s the repayment.
This is true with all debts. Simply reducing the loan amount won’t therefore help. For example, you put $10,000 towards a personal loan that you have - great! But this won’t reduce the repayment by itself…
What helps? Requesting a “recast” to have your repayments recalculated based on the new, lower balance. That will improve your borrowing capacity.
💡Another tip: to reduce your repayment, you could extend out your loan term. This needs to be done with caution and under good advice (as you don’t want to unnecessarily pay extra interest).
3. Is Paying Off Your Home Loan Early Always the Best Move?
Sometimes — but not always.
If your priority is building cash flow, enjoying life, investing elsewhere, or staying flexible, then hammering your mortgage might not be the smartest thing to do.
It seems like a sensible thing to do, and for many, it is. But not everyone wants to give up 20 years of living to save 10 on their mortgage - and that’s okay! Remember, finances are not the means to an end, it is a tool to help you achieve your financial or life goals.
It all depends on your bigger financial picture, and how your loan strategy aligns with it.
4. Is the Lowest Interest Rate Always the Best Option?
Tempting — but not always right.
Sure, rate matters. But so do:
Product features like offset accounts or redraw
True weekly repayment options (vs bank-calculated ones)
Turnaround time (especially in fast-moving markets)
Lender policy around your situation (casual work, self-employed, etc.)
To be honest, most client I have reviewed - their objective is generally around cash flow, rather than the outright best rate.
And to address those readers thinking: “Well Blake, wouldn’t a lower rate automatically mean better cash flow”. To that I answer - no, not always. To provide more insight, here a few points to challenge this thought pattern;
Some lenders allow you to base your repayment on the outstanding loan amount rather than the original limit on the loan. For some, this can significantly reduce your repayment.
You may have monthly fees or annual fees that need to be accounted for.
You may have a preferred repayment frequency but the lender with the best rate doesn’t allow for true weekly or true fortnightly repayments - thus you make an extra month's worth of repayment every year, and end up paying more.
A lender with the best rate may not offer you a 30 year loan term (more relevant if you are 50+)
Fixed rates currently provide you with a discount compared to variable however, banks are generally ahead of the curve meaning they are factoring in future rate cuts. More often than not, this option could actually cost you more over a 2 -3 year term (especially in a rate cutting cycle).
Now don’t get me wrong, I believe it’s about finding the best rate with the correct strategy that fits your needs and preferences.
5. What Does LMI Actually Cover? (Hint: It’s Not You)
That’s right — it protects the bank.
But that doesn’t mean it’s a bad thing. Although, I believe LMI is way overpriced.
Paying LMI can actually be a smart strategy if it helps you buy sooner, avoid rent, or get into a rising market.
Sometimes the cost of waiting is higher than the cost of the insurance.
6. Can You Be Too Old for a Mortgage?
Not necessarily— age alone isn’t a disqualifier.
Lenders are required to ensure there’s a reasonable exit strategy in place (like superannuation, downsizing, or selling another asset). I’ve helped many people in their 50s and 60s get 30 year loan terms— the key is having a clear plan for how the loan will be repaid over time.
Each lender has a very different exit strategy policy around this, so it’s important to seek advice if you are 50+.
You’d be surprised, a handful of lenders will still provide you with a 30 year loan term. They more so do this because it reduces the repayments but they understand that you will likely exit out of the loan during that 30 year period, which is why they are happy to provide this option.
7. Can Casual Workers Still Get a Home Loan? Yes — Here’s How
Many lenders accept casual income — most will want 6-months worth of earnings history, others will annualise your income over 48 or 52 weeks. Some even accept less if your income is stable and you have a good history in this industry.
It all comes down to choosing the right lender.
8. Can You Get a Home Loan with Just 1 Year of Self-Employed Income?
Absolutely.
A shorter history however is deemed to have more risk, so the interest rate might be a little bit higher than what is offered with some of those larger lenders.
If you’ve been running for 2 years however, but the last 12 months worth of income has been solid - some of those larger lenders will accept the last 12 months of returns in isolation, which can be a great option for many.
Others might assess based on company profit or your PAYG income (the key is finding a lender who suits your business and pay structure).
If you are going to take anything away from this point, please speak with a broker in advance to plan out your entry into the market or your next property purchase.
9. Low Business Net Profit? You Might Still Get a Mortgage
Some businesses have lots of deductions (depreciation, tax write off’s, etc.) — and lenders may add those back when calculating borrowing power.
When it comes to assessing business profitability, nearly every lender varies on how they assess your income. You might be surprised, you could have more options than you realise.
If you're paying yourself a consistent salary from your business (i.e. from a company structure), some lenders may treat you just like a regular employee - this can make a huge difference in borrowing capacity.
10. Just Changed Jobs? You May Still Qualify for a Loan
Some lenders will consider your income after just 1 day in a new role, depending on the industry and your employment history.
If it’s a progression within your field, it might not hold you back at all.
If you have a solid history in your industry and very little (to no) gaps between employment, you may have many more options than you think.
Final Thoughts: Ask, Don’t Assume
The mortgage world is full of rules — but also exceptions.
Don’t let outdated advice, casual comments, or online rumours stop you from exploring your options. Everyone’s situation is different — and so is every lender’s policy.
If you’ve heard something that’s holding you back from getting started, I’d love to help you get clarity.
Heard any of these myths before? Let’s make sure you’re getting the right advice.
Your situation might have more options than you think — and I’m here to help you figure that out.
📩 Contact Blake via the contact form, or book a meeting for a no-pressure chat about your home loan options.
