The mortgage process can be overwhelming—especially when you’re sorting through an avalanche of information, much of which may be outdated or just plain wrong. From misconceptions about down payments to confusion over who can qualify, mortgage myths can muddy the waters for first-time and experienced buyers alike.
In this guide, we’ll clear up the most common mortgage myths so you can move forward with confidence and clarity on your path to homeownership.
Myth 1: You Need a 20% Down Payment
While putting down 20% can help you avoid paying for lenders mortgage insurance (LMI), it’s not a strict requirement. Many lenders offer home loans with as little as 5% down—some even less if you’re eligible for government grants or schemes. The right down payment amount depends on your financial situation and goals.
Myth 2: You Need Perfect Credit to Get Approved
A strong credit score can help secure a better interest rate, but you don’t need perfect credit to qualify for a mortgage. Lenders consider a range of factors, including your income, savings, and overall debt levels. There are also loan programs tailored for borrowers with less-than-ideal credit histories, such as government-backed options.
Myth 3: Adjustable-Rate Mortgages Are Always Risky
Adjustable-rate mortgages (ARMs) often get a bad rap, but they’re not inherently risky. If you plan to own the home for only a few years or refinance in the near future, an ARM can offer lower initial repayments. Just make sure you understand the terms and how rate adjustments will work over time.
Myth 4: The Lowest Interest Rate is Always the Best Deal
It’s tempting to chase the lowest rate, but it’s only part of the equation. Loan fees, features, and the loan’s overall structure also affect how much you’ll pay. A loan with a slightly higher rate but lower fees or better flexibility may end up being the better value.
Myth 5: Self-Employed Borrowers Can’t Qualify
It’s absolutely possible to qualify for a home loan when you’re self-employed. You’ll likely need to provide more documentation—like tax returns, profit-and-loss statements, and bank records—but many lenders cater to self-employed applicants. Working with a broker can help you find suitable lenders.
Myth 6: Refinancing Always Saves Money
Refinancing your mortgage can lead to savings—if the numbers make sense. It depends on how long you plan to stay in the home, what your current and future interest rates are, and the closing costs of the new loan. Refinancing without a clear cost-benefit analysis could cost more than it saves.
Myth 7: Paying Off Your Mortgage Early is Always Best
Paying off your home loan ahead of schedule can be a great move—but it’s not always the smartest. If your mortgage has a low interest rate, it may be more beneficial to invest surplus funds elsewhere, especially if your other debts are more expensive. It’s all about opportunity cost and financial priorities.
Myth 8: All Mortgages are Basically the Same
Every lender has its own policies, fees, and service levels. Shopping around can help you find a loan that fits your needs—not just your budget. Comparing features like offset accounts, redraw options, and flexibility around extra repayments can make a big difference.
Myth 9: Student Loan Debt Automatically Disqualifies You
Having student debt doesn’t prevent you from getting a mortgage. What matters most is how that debt affects your debt-to-income ratio. If you manage your student loan repayments responsibly and have a steady income, many lenders will still consider your application.
Myth 10: A Low Credit Score Means You Can’t Get a Loan
A low credit score can make qualifying more challenging, but it doesn’t rule you out. Loan programs like FHA (in the US) or low-deposit loans in Australia are designed to help borrowers with imperfect credit. Taking steps to improve your score and working with a lender that specialises in your situation can open doors.
Understanding Closing Costs
Once you’ve navigated the myths and secured mortgage approval, one final hurdle remains: closing costs.
What Are Closing Costs?
Closing costs are the additional fees and charges paid at settlement, typically ranging from 2% to 5% of the home’s purchase price. These may include:
- Lender fees: Origination, underwriting, and processing charges
- Title insurance: Protection against future title disputes
- Appraisal fees: An independent valuation of the property
- Escrow fees: Costs for managing the transfer of funds and paperwork
- Government charges: Stamp duty, registration, and recording fees
Can Closing Costs Be Negotiated?
Yes. You may be able to:
- Request the seller to contribute
- Use lender credits to offset costs
- Roll some fees into the loan (if the lender allows)
Ask your broker or lender to help identify where costs can be reduced or negotiated.
Final Thoughts
Understanding the truth behind common mortgage myths—and what closing costs really involve—can give you the edge in a competitive property market. Don’t let misinformation hold you back. With solid facts and the right support team, you can move confidently toward homeownership and financial independence.