10 Mortgage Myths

Myth#1: Opt for a home loan package with a lower interest rate

Since each person has unique needs and spending habits, a home loan package that appears to be suitable for one individual may not be suitable for others. Typically, a low-interest rate loan comes with certain conditions and restrictions that may not be as flexible as other packages. Therefore, before selecting a home loan package, it is important to research all of the available options, read the fine print, and assess how it aligns with your lifestyle.

Myth #2: Rejection of Home Loan Calls for Panic!

It is common to feel anxious when your home loan application is denied by lenders. However, it is important to stay calm and avoid taking any impulsive actions such as sharing your financial statements with every lender in the region. Keep in mind that each lender has distinct criteria for loan approvals. Therefore, conduct research to learn about the various standards and requirements that the banks you are interested in have.

Myth #3: Becoming a Guarantor is Detrimental

Assisting a friend in need is commendable, but it is important to be absolutely certain of your friend's financial stability to repay their loans before agreeing to become a guarantor. Once you sign the legal contract, you are liable to either repay the loan or face bankruptcy if the borrower defaults on their payments. If you are unable to repay the loan, you will be blacklisted, making it virtually impossible to acquire loans in the future. Hence, it is better to be safe than sorry.

Myth #4: Even if the Base Lending Rate (BLR) increases, my loan installment isn't affected

Assuming that maintaining your current installment plan is adequate when the BLR rises is a novice mistake. Even if you choose to keep your installment unchanged, you must be prepared for the consequences. The disadvantage of maintaining your installment in this situation is that your loan tenure will be extended, and you may have to pay more interest. Therefore, if you can afford it, increase your loan repayment and keep your loan tenure the same.

Myth #5: Mortgage Planning is a Waste of Time

As the saying goes, "failing to plan is planning to fail." If you don't plan your finances, you are essentially giving away thousands of dollars to the bank in the form of interest. Before you know it, you may retire and still be in debt. Begin early and educate yourself on mortgage planning techniques to ensure a debt-free retirement.

Myth #6: I am a bad paymaster and cannot apply for a mortgage

Admitting to a flaw is the first step in rectifying it. Being a poor paymaster does not preclude you from applying for a mortgage. Everyone experiences financial difficulties at times; the key is to find the best loan repayment plan for you and gradually rebuild your creditworthiness.

Myth #7: My Loan Approval is Guaranteed

Do not be overconfident. It is critical to verify with the banks whether you meet all of the criteria required for loan approval. Even if you satisfy the criteria, always have a backup plan before putting down a deposit to purchase a house. There may be factors that you overlooked that could lead to loan rejection later on.

Myth #8: Who needs Mortgage Insurance

It's important to understand that mortgage insurance and life insurance serve different purposes. Mortgage insurance is designed to protect the lender in case the borrower defaults on their mortgage payments. On the other hand, life insurance is meant to protect the family or beneficiaries of the insured in case of their untimely death. While life insurance is not mandatory for mortgage financing, it can be a good idea to consider it as a way to protect your loved ones in case of an unfortunate event.

Myth #9: Debt is a Dirty Word

Debt can be a useful tool if used responsibly and with a plan in place to manage it. It's important to differentiate between good debt and bad debt. Good debt is debt used to purchase assets that appreciate in value, such as a mortgage on a property that increases in value over time. Bad debt is debt used to purchase items that decrease in value, such as a credit card debt used to buy clothes or electronics. It's important to have a plan to manage and pay off debt, and not let it become overwhelming or unmanageable.

Myth #10: Mr Mortgage Financing Know-It-All

It's important to continue learning and staying up-to-date with the latest information and trends in the market. Attend seminars, courses, and network with professionals to gain insights and knowledge. The financial market is constantly evolving and what was true yesterday may not be true today. Don't rely solely on one person or source for information, but instead seek out a variety of perspectives and sources to make informed decisions.

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