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Getting a Mortgage in the UK in 2023. Dispelling the myths

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A mortgage is one of the biggest commitments you will take on. When deciding to buy a home, you need to be aware of the possible obstacles you will encounter. One of these is the rejection of your mortgage application. In today’s article, we’ll address seven common myths and show you how getting a mortgage in the UK really works.

Getting a mortgage in the UK in 2023 Extend Finance
Getting a mortgage in the UK – application form

Myth No. 1: Due to high interest rates and the crisis, I will need a significantly larger deposit.

Many people expect the next few months to be very difficult when it comes to finances. Inflation is still high and interest rates are regularly rising. Intuition tells us that banks will require their customers to have a large deposit. Fortunately, it turns out to be quite the opposite – recently, a mortgage without a deposit has appeared on the market. Although not all interested parties meet the conditions of the offer, there are indeed many people who are able to take advantage of this product.

Even if you do not qualify for a no deposit mortgage, many banks can offer you very favourable alternatives. These days, a 10% deposit on the value of the property is standard, and many institutions will even agree to 5%! If you are looking for a small property outside of a big city, raising a deposit is a matter of about a year, as many of our clients can confirm.

Myth No. 2: If I have a low credit score, nobody will lend me money

If you think that a low credit score automatically prevents you from getting a mortgage, we have very good news for you – this is absolutely not the case! When deciding whether to lend you money, bank analysts take into account a number of factors, such as your age, earnings, address of residence, occupation and lending history. If your credit score is low due to a lack of installment purchases, the bank’s decision does not have to be negative, although the chances of success are a little lower. It’s much worse if there are negative entries on your credit report, for example due to late payments of debts or debt enforcement seizures.

Even if you have missed a payment deadline or have been subject to debt collection, your chances are not zero. They are simply less, and the banks’ offers may be less attractive. The worse your credit history, the higher the deposits and interest rates will be.

If you are unsure about your credit score, be sure to arrange a free consultation with an advisor. They will tell you in a matter of minutes whether it is worth applying for a mortgage in your situation or whether you should hold off for the time being.

Myth No. 3: If I’m 50, I’m too old for getting a mortgage

Contrary to what you might think, it is very rare for a mortgage application to be rejected because of the applicant’s age. The banks’ offers vary greatly, and in many cases, at the age of 50 you might be capable of getting a mortgage for 25 or even 30 years. Of course, it all depends on your income and projected pension, which will usually be less than your last salary.

In practice, the bank determines the maximum age at which the borrower will complete the repayment of the mortgage. For example, if such a barrier is set at 80 years, a person aged 55 will receive a mortgage for a maximum of 25 years, but someone aged 45 will be able to repay their home for up to 35 years.Usually, the age limit is between 70 and 85 years, so if you are older than 45, be sure to take this criterion into account.

Myth No. 4: Getting a mortgage when self-employed is very challenging

As a general rule, banks look at universal criteria such as stability and amount of income, property value and credit history. Although confirming the income of a self-employed person is a little more onerous in terms of documentation, it is certainly not impossible.

If you are self-employed, have a stable and sufficiently high income and are keen to obtain a mortgage, everything is within your reach.Your chances will be further increased if you hire a good mortgage adviser and an accountant who knows their job.

Myth No. 5: Lowest interest rate = cheapest mortgage

Although it may not be intuitive, the cheapest mortgage will not necessarily have the lowest interest rate. The total cost of your commitment will be driven by a number of factors, most notably:

  • The type of contract – a variable rate mortgage could prove much more expensive if the Bank of England raises interest rates yet again. A fixed rate mortgage, on the other hand, means that if interest rates fall, your repayments will only fall after a few months or even years.
  • Duration of the offer – if you decide on getting a mortgage with a fixed rate, your installments can remain constant for 2,3 or 5 years, and this affects the total cost of the mortgage.
  • Fees and commissions – in some cases, the application fee is more than £1,000. Although this is a relatively small amount compared to the price of the whole property, it can determine the choice of a particular mortgage.

Myth No. 6: There is no point in looking around for a mortgage until I find a property

In fact, the exact opposite is true. There is no point in looking around for a property unless you start talking to your adviser about a mortgage. First of all, the mortgage determines the amount of money you will be able to spend on the purchase of your new home, and calculating it is not at all that simple. In addition, one of the main tasks of a mortgage adviser is to bail you out of all the tasks that you don’t have to do personally. As a result, dealing with the mortgage will not be time-consuming for you – at the same time, you can look around for a property.

In addition, if you apply for a Decision in Principle (DIP), you will be a more attractive buyer for the current property owner, as the whole transaction will go noticeably faster.

Myth No. 7: If you have recently changed jobs, you have to wait before getting a mortgage

Even if you changed jobs a few weeks ago, this should not be an obstacle to getting a mortgage. Bank analysts are aware that seniority does not always translate into income stability. If you have increased your income with the change of employment, this may even be a big advantage.

If your career is going in the right direction and a job change results in a promotion, you have nothing to worry about. Worse, if you’ve completely changed careers, have a long probationary period or have moved to a temporary contract – this is exactly what banks discourage. Whatever your situation, a good solution is to contact a mortgage adviser, such as Extend Finance. Our many years of experience and knowledge of the sector mean that we are able to dispel your doubts.

Summary

Are you buying your first property? Or have you grown a family and it’s time to buy a new, more spacious home? Whatever your answers to the above questions, arrange a no-obligation, free consultation. We’ll help you through the entire UK property buying process!

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Think carefully about securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. Conveyancing services and some forms of Buy to Let mortgages are not regulated by the Financial Conduct Authority.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts
secured on it.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. Conveyancing services are not regulated by the Financial Conduct Authority.

Extend Finance nor The Right Mortgage Limited can’t provide advice regarding Personal Pensions, Pension planning or investment planning advice. You must seek independent financial advice from a suitably qualified professional financial adviser who may charge you for advice.

Wills, Will writing, Trusts and Trust planning are not regulated by the Financial Conduct Authority.

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