When it comes to mortgages, the process can be daunting for many first-time buyers and even experienced homeowners looking to move or remortgage. With so much information floating around, it’s easy to fall into the trap of believing common misconceptions and often negative headlines. Here are some of the biggest myths surrounding mortgages in the UK, and the truth behind them.
1. You Need a Huge Deposit
Many people believe that unless you have a 20% deposit or more, you won’t be able to get a mortgage. While a larger deposit can certainly help you secure better interest rates, there are mortgage products available for buyers with as little as a 5% deposit. Government schemes like Help to Buy and Shared Ownership can also assist those with smaller savings, making homeownership more accessible.
2. You Can’t Get a Mortgage If You’re Self-Employed
Self-employed individuals often think they won’t be able to get a mortgage because of their irregular income. However, this is not the case. Most lenders will want to see at least two years of financial records to assess your earnings, however, we have worked with lenders that will accept just 1 year of accounts. As long as you have proof of a stable income and manage your finances well, there’s no reason you can’t secure a mortgage.
3. The Lowest Interest Rate is Always the Best Option
While it’s tempting to go for the mortgage with the lowest interest rate, it’s important to consider the whole package. Some products with lower rates may come with higher fees or other terms that make them less cost-effective in the long run. It’s crucial to look at the Annual Percentage Rate of Charge (APRC) and other factors like flexibility, overpayment options, and overall costs before making a decision.
4. You Should Always Choose a Fixed-Rate Mortgage
A fixed-rate mortgage offers stability, which is why many people opt for it, believing it’s always the safest option. However, in some circumstances, a variable-rate mortgage could be a better fit, especially if interest rates are expected to drop. It’s important to assess your risk tolerance and financial situation before deciding which mortgage type works best for you.
5. My Credit Score Needs to be Perfect
While having a good credit score will certainly help you get better deals, having less-than-perfect credit doesn’t mean you can’t get a mortgage. Many lenders offer products tailored to people with lower credit scores. Specialist brokers can also help match you with the right lenders who are more likely to accept your application.
6. Once You Have a Mortgage, You’re Stuck with It
Many people don’t realise that they can remortgage once their initial deal comes to an end, or if their financial situation changes. Remortgaging can help you get a better rate, release equity, or adjust the term of your mortgage to suit your current needs. In fact, reviewing your mortgage options regularly could save you a significant amount of money.
7. It’s Harder for First-Time Buyers to Get a Mortgage
While the property market can be competitive, first-time buyers have access to a range of helpful schemes designed to make homeownership easier. From First Homes to Lifetime ISAs and Stamp Duty relief, there are various ways to make the process more affordable.
8. You Should Always Max Out Your Budget
Just because a lender offers you a higher mortgage limit doesn’t mean you should take it. Stretching your budget to the maximum might leave you financially vulnerable, especially if interest rates rise or your financial circumstances change. It’s better to consider what’s affordable and comfortable based on your own income and long-term financial goals.
9. The Mortgage Process is Quick and Easy
Many believe that once you apply for a mortgage, it’s a simple process of approval and completion. However, mortgages can take time, especially when considering factors like property surveys, legal work, and application checks. The process can vary in length depending on individual circumstances, so it’s important to be patient and prepared.
10. Using a Mortgage Broker Will Cost You More
Some people avoid using mortgage brokers thinking it will be more expensive. In reality, mortgage brokers often have access to deals that aren’t available directly to the public, and they can guide you through the process, ensuring you choose the best option for your circumstances. The expertise and time saved can often outweigh any broker fees, and many brokers offer free initial consultations.
Final Thoughts
Navigating the mortgage landscape can be tricky, especially with so many myths clouding the process. Whether you’re a first-time buyer, self-employed, or looking to remortgage, working with an experienced broker can help you cut through the misconceptions and find a mortgage that suits your individual needs. Don’t let misinformation hold you back from making confident decisions about your future home.
Speak to our award-winning advisors today for your free mortgage review!