Most first home buyers walk in fixated on two numbers: how little they can put down, and who’s got the cheapest rate. In a market this tight, that combination can be an expensive mistake. Here are five myths I hear constantly — and what’s actually true.
Myth 1: “A 5% deposit means I’m in the clear”
A 5% deposit gets you to the starting line, not across it. Your lender — and often their mortgage insurer — still has the final say on whether that 5% is enough, and it rarely is on its own. On top of the deposit you need stamp duty (unless you qualify for an exemption or concession), legal and inspection costs, and a genuine buffer. Buyers who stretch every last dollar into the deposit with nothing left over are the ones who get caught out by a valuation shortfall, an unexpected lender condition, or a repair bill right before settlement. Lenders also don’t treat every borrower the same at 5%: some want a bigger deposit for higher-density units, studio apartments, regional postcodes, or if your income leans heavily on bonuses or commission.
Myth 2: “LMI is just dead money”
Lenders Mortgage Insurance protects the lender, not you — fair criticism. But dismissing it outright ignores the actual trade-off: LMI lets you buy with less than a 20% deposit by shifting some of the lender’s risk to an insurer, and the premium can usually be added to the loan rather than paid upfront. For someone who’s financially comfortable with the repayments but would otherwise spend years chasing a moving deposit target in a rising market, paying LMI to buy now can come out ahead of waiting. Run the “what does my 5-to-10-year position look like if I pay LMI and buy today” scenario before writing it off.
Myth 3: “Any deposit counts, however I got it”
This is the one that catches people out late in the process. Lenders care deeply about how your deposit was built up — genuine savings, held in your name for a minimum period (typically three months, sometimes six for higher-risk applications), is what most lenders and their mortgage insurers want to see. A sudden inheritance, a personal loan dressed up as savings, or short-term crypto and share trades don’t automatically count, even if the cash is sitting in your account right now. If you know you’ll need to buy within the next 6–18 months, start building a clean, documented savings pattern today — consistency matters more than the total.
Myth 4: “The cheapest rate is always the best loan”
Comparison sites have trained everyone to chase the lowest headline number, but the cheapest rate on screen isn’t always the most useful loan in practice. A low-rate lender might apply tighter policy on debt-to-income ratios, overtime, bonus or rental income — so if they’ll lend you less than a competitor, you may end up compromising on location, size or features anyway. A slightly higher rate with an offset account, redraw, or a lender who structures your loan around your next five to ten years can be worth more than 0.10–0.20% off the rate, especially if you’re planning to buy again, invest, or use equity down the track.
Myth 5: “It’s all down to what the online calculator says”
Borrowing power calculators are a starting point, not a verdict. They run simplified rules and averages — they don’t see irregular income, upcoming life changes, or smart debt structuring. And from 1 February 2026, APRA has capped how much of Australian banks’ new lending can go to borrowers with debt-to-income ratios of six times income or more — each bank can only write up to 20% of new lending at that level, applied separately across owner-occupier and investor books. That means a $950,000 “yes” from one major bank can become a very different number at another lender, or a stronger yes at a non-bank, depending on how close each lender already is to their cap. The smarter question isn’t “what’s my lowest rate” — it’s “what structure and lender mix gives me the best balance of rate, borrowing power, flexibility and risk management over the next five to ten years?”
The takeaway
None of these myths are really about lying to yourself — they’re about optimising for the wrong number. A broker who knows current lender policy on DTI, genuine savings and buffers can often find tens of thousands of dollars of borrowing power (or years of time) that a quick Google search won’t.
General information only, current as at July 2026 — not personal financial advice. Lending policy, LMI premiums and APRA requirements vary by lender and change over time; get advice specific to your situation.
