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Getting a Mortgage. Truth vs fiction

Obtaining a mortgage is a significant financial commitment, so gather as much information as possible before beginning. However, you may come across some obsolete or inaccurate information along the process. We’ll examine seven prevalent mortgage “myths” and provide our professional opinion on each one.

Mortgage – truth vs fiction.

Because of Covid-19, you’ll require a considerably larger deposit.

Perhaps!

Okay, so lenders have tightened their requirements as a result of Covid-19, and loan-to-value percentages have usually decreased, implying that you’ll need a higher deposit in most situations. However, if you’re looking for a newly constructed property, the Help to Buy Equity Loan scheme allows you to buy one with just a 5% down.

For both first-time purchasers and house changers, equity loans are available for newly built homes with a price tag of up to £600,000. The government will lend you up to 20% (or 40% if you live in London) of the cost of your newly constructed home under this programme.

So you put down 5%, the government provides a 20% loan, and the remaining 75% is your mortgage from a lender. For the first five years after you purchase your house, you will not be charged interest on the 20% government loan.

If you have a bad credit score, you won’t be able to acquire a mortgage.

Almost true.

Contrary to common opinion, a credit score is not everything, and you may acquire a mortgage even if your credit score is below average. If you haven’t used much credit in the past, which isn’t your fault, you should be OK. As long as you don’t have anything negative on your credit report, you should be fine.

Even if you have a poor credit history, such as a CCJ or missing payments, you may still be able to obtain a mortgage; however, you should be aware that your options may be restricted, and the mortgage offers available may have higher rates and fees, as well as a greater deposit.

It’s important to speak with a mortgage broker about the alternatives available to you based on your unique situation.

You’re too old to qualify for a mortgage.

Yes and no.

You will need to be aged 18 or over to be classed as being able to legally contract. There is no fix maximum age for obtaining a mortgage; instead, each lender sets its own age restriction, which generally ranges from 70 to 85 years once the mortgage term ends. So, while your age may limit your possibilities in most situations, it doesn’t imply you’re ineligible.

For example, if you’re 50 and want a 30-year mortgage, you’ll only be able to find lenders who accept mortgage term end ages of 80 and up. If you’re 65, you might only be able to acquire a 20-year mortgage from a select group of lenders.

All other requirements (income, affordability, credit history, and so forth) must be satisfied as well.

Myth 4: If you are self-employed, getting a mortgage is quite tough.

Again, yes and no.

Everyone must meet the same fundamental requirements for approval: a steady income, affordability, and a solid credit history. In terms of the documents necessary, however, proving evidence of income for self-employed borrowers is typically more difficult. As a result, it’s a frequent misunderstanding that self-employed candidates will have a harder time getting a loan than paid employees.

If you’re self-employed and have a steady income, you should be OK. You’ll need a reputable mortgage adviser and an accountant.

The cheapest mortgage is the one with the lowest interest rate

Not necessarily.

Do not make the mistake of assuming that the lowest mortgage rates are the right deal. The total cost of your mortgage is influenced by a number of factors.

  • You may have a tracker mortgage, which means your rate could rise at any time, or a fixed-rate mortgage, which means your rate will stay the same for a certain amount of time.
  • Duration of the offer: After the first deal term, you’ll be transferred to the lender’s normal variable rate, which is often significantly higher.
  • Fees: These can go into the thousands of pounds and must be factored into the entire cost.

It’s pointless to look into mortgages before you’ve found a home.

Simply wrong!

Putting off the mortgage procedure until you’ve discovered the property you want to purchase is a mistake.

Instead, be proactive and speak with an adviser before you begin looking for a home so that you can determine what your budget should be. Look for a home and look into the mortgage market to determine what you can afford. You should also apply for a Decision in Principle (DIP), which allows you to gain a jump on the competition and makes you a more appealing buyer.

If you’ve just moved jobs, you should wait to apply for a mortgage.

Not, really.

If you’ve just changed employment, you can still acquire a mortgage; it’s not a deal-breaker. Lenders understand that duration of work does not necessarily imply stability; in order to advance in a career, one must frequently change jobs.

So, if you’ve had a successful career and have changed positions in search of a better opportunity, you should be OK. There may be certain exceptions, such as if you’ve made a major career shift or if your new work has a long probationary term, or if you’ve recently converted to a temporary contract, etc.

If you find yourself in this scenario, it’s essential to talk with a mortgage consultant; professional guidance will guarantee that you don’t miss out on a job chance simply because you’re going to apply for a mortgage, or that you don’t put your move on wait because you began a new job!

Whether you’re looking to get your first foot on the property ladder, buy a larger home for your growing family, or invest in real estate, having the appropriate knowledge is critical. We would like to offer our services for a free consultation as we deconstruct the world of mortgages – contact us immediately!

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.

About Author

Mariusz studied in Poland and the UK and graduated in both banking and logistics. He has worked in the finance sector for many years and since 2017 he has been professionally advising clients on insurance products and mortgages.