7 Things Your Bank Told You About Home Loans That Simply Aren't True

Key Takeaways                                 

•        A bank can only offer its own products, so its best rate may not be the best one for you.

•        You do not always need a 20% deposit; lower-deposit paths exist.

•        Pre-approval is a helpful step, not a guarantee of final approval.

•        A broker compares many lenders for you, usually at no cost to you.

When you are getting a home loan, it is easy to take what you are told at face value, especially when it comes from your own bank. Most of the time the information is fine, but some widely held beliefs about home loans are out of date or only tell half the story, and believing them can quietly cost you options, or money.

Here are seven common myths about home loans, and what is actually true. None of this is a criticism of banks; they do their job well, but a bank can only ever talk to you about its own products. As brokers, we look across many lenders, so we tend to see the fuller picture. This is general information, not financial advice.

If any of these sound familiar and you would like a straight answer for your own situation, you are welcome to talk it through with our team, with no cost and no pressure.

The Seven Myths, and the Truth

Let's take them one at a time.

Myth One: Staying Loyal to Your Bank Gets You the Best Deal

Loyalty is a fine quality, but it is not always rewarded with the sharpest pricing. Lenders often reserve their most competitive offers for new customers, while long-standing borrowers quietly stay on older deals. It is worth reviewing your loan every year or two to check you are still being looked after, and a broker can do that comparison for you.

Myth Two: You Need a 20% Deposit to Buy

A 20% deposit helps you avoid lenders mortgage insurance (LMI), but it is not a hard requirement. Many buyers purchase with 10% or even 5%, paying LMI as an added cost, and some eligible first home buyers qualify for the government's low-deposit scheme, which allows a purchase with as little as 5% and no LMI. Guarantor arrangements can help too. The right path depends on your circumstances, not on a single fixed number.

Myth Three: Your Bank's Rate Is the Best Available

Your bank can only offer its own products, which is completely normal, but it means the best rate they quote is the best among their loans, not across the market. Different lenders price differently and suit different situations. Banks are also not required to compare the wider market for you, whereas a broker's job is to do exactly that, so you can see how your bank's offer stacks up rather than assuming it is the sharpest.

Myth Four: Pre-Approval Means You're Guaranteed the Loan

Pre-approval is a useful step that gives you a good idea of how much you may be able to borrow, but it is usually conditional, not a promise. Final approval still depends on things like the property valuation, your circumstances staying steady, and the lender's final checks. It is wise to treat pre-approval as a strong guide, keep your finances stable while you shop, and avoid over-committing before formal approval comes through.

Myth Five: Comparing Lenders Will Wreck Your Credit Score

Every formal loan application is recorded on your credit file, and several applications in a short space of time can have some effect on your score. But comparing your options is not the same as applying everywhere. A broker can assess many lenders for you and then lodge a single application with the one that suits you best, so you get the benefit of comparison without scattering applications across the market.

Myth Six: A Home Loan Is Set-and-Forget

Once the loan is in place, it is tempting never to look at it again, but a loan that suited you a few years ago may not suit you now. Rates, loan features and your own life all change over time. Reviewing your loan periodically, and refinancing or restructuring when it genuinely makes sense, can keep it working for you. No one can promise savings, but it is worth checking rather than assuming all is well.

Myth Seven: Using a Broker Will Cost You Money

For most home loans, a broker's service is free to you, because the lender pays the broker a commission once your loan settles. On top of that, mortgage brokers have a legal best interests duty, which means they must put your interests first when recommending a loan; banks are not held to that same duty. In the rare cases where a fee does apply, it must be set out and agreed in writing before any work is done. In short, you generally get the comparison and the guidance at no direct cost.

A Real-World Example: A Clearer Picture

Here is how shaking off a couple of these myths can play out, with round figures. Treat it as a guide only.

Bianca assumed she needed a 20% deposit and that her own bank's rate was as good as it got, so she had almost resigned herself to waiting another two years. On a $500,000 home, a 20% deposit meant saving $100,000, which felt a long way off. When she spoke to a broker, she learned she might buy sooner with a 5% deposit, around $25,000 plus costs, and that a few lenders suited her situation better than she had expected.

She chose an option she felt comfortable with, applied once to the lender that fit, and bought earlier than she thought possible. Nothing was promised about rates or prices; she simply ended up with more options, and a clearer picture, than the myths had given her.

Where to Read More

The Australian Government's Moneysmart explains using a mortgage broker, including how brokers are paid and the questions worth asking.

Frequently Asked Questions (FAQs)

Is my bank's home loan rate the best I can get?

It might be, but you cannot know without comparing. Your bank can only offer its own products, so the rate it quotes is the best among its loans, not across the whole market. Other lenders price differently and suit different borrowers. A broker can compare many lenders for you and show you how your bank's offer compares, so you can decide with the full picture rather than assuming.

Do I really need a 20% deposit?

No. A 20% deposit lets you avoid lenders mortgage insurance, but plenty of buyers purchase with 10% or 5%, paying LMI as an extra cost. Some eligible first home buyers can use the government's low-deposit scheme to buy with as little as 5% and no LMI, and guarantor arrangements are another option. The right deposit path depends on your situation, so it is worth getting tailored advice.

Does pre-approval guarantee my loan?

Not quite. Pre-approval is a helpful guide to how much you may be able to borrow, but it is usually conditional. Final approval still depends on the property valuation, your circumstances staying steady and the lender's final checks. Treat it as a strong signal rather than a promise, keep your finances stable while you look, and avoid committing fully until you have unconditional approval.

Will comparing lenders hurt my credit score?

Comparing options is not the same as applying everywhere. Each formal application is recorded on your credit file, and several in a short period can have some effect on your score. A broker can assess many lenders for you and then lodge just one application with the lender that suits you, so you get the benefit of comparison without multiple applications. This is one of the quiet advantages of using a broker.

How much does a mortgage broker cost?

For most home loans, nothing directly. The lender pays the broker a commission once your loan settles, so the service is generally free to you. Brokers also have a legal best interests duty to put your interests first. In rare cases a fee may apply, for example on very small or complex loans, but it must be set out and agreed in writing before any work begins, so there should be no surprises.

Should I review my home loan after I get it?

Yes, it is a good habit. A home loan is not really set-and-forget, because rates, features and your own circumstances change over time. Reviewing it every year or two, and refinancing or restructuring when it makes sense, helps keep it suited to you. No one can promise savings, but a quick check costs nothing and a broker can do the comparison for you.

The Bottom Line

Most home loan myths are not anyone setting out to mislead you; they are just half-truths that have stuck around. But believing them can leave you with fewer options or a loan that no longer fits. The common thread is comparison: a bank can only show you its own products, so the only way to know whether you are getting a fair deal is to look more widely.

That is where we come in. As brokers, we compare many lenders, explain the trade-offs in plain language, and have a duty to act in your best interests, usually at no cost to you. If you would like a straight, no-pressure answer for your situation, we are here to help, someone in your corner rather than across the counter.