Are mortgage myths making applying for a mortgage a daunting prospect?
Many common anxieties about mortgages and myths are based on outdated or untrue information.
So, we thought we’d round up a few common myths and debunk them individually. This will give you confidence in your mortgage application.
Every mortgage is the same.
On the face of it, all mortgages are the same. All mortgage loans are to buy or refinance a property, so you could lose your home if you don’t keep up with the repayments.
But that’s a very simplistic summary of mortgages, as many different types are on offer.
For example, a tracker mortgage changes in line with interest rates set by the Bank of England. While a fixed-rate mortgage offers set monthly payments for a specific period.
Or you could be on a standard variable rate mortgage (SVR), which can change in line with market conditions.
Since so many types of mortgages are on offer, it’s worth getting financial advice from an expert in this area. This way, you can find the mortgage that best suits you and your family and not be distracted by myths.
Your credit score must be perfect.
Lenders want to be happy that anyone taking out a loan can repay it so that they will look at your credit rating.
But if you’ve missed the odd credit card payment in the past, that doesn’t mean your mortgage application will be rejected automatically.
Although you might not get as favourable a rate as someone with a perfect credit score, there’s every chance you’ll still be offered a mortgage that suits you.
Mortgage brokers don’t offer the same financial protection as banks
Not true. Mortgage brokers are regulated by the Financial Conduct Authority (FCA), just like banks.
That means you can be sure brokers have the expertise to advise you.
They will also have a proper complaints procedure if you’re unhappy with their service.
Mortgage brokers are a more costly option.
Another mortgage myth. When looking for mortgages, you’ll open yourself up to a broader range of options by considering mortgage brokers compared to banks.
Banks are restricted to their mortgage products, while independent brokers, like Spectrum, have access to various lenders and can find the best fit for your needs.
So, there’s every chance you could get a better deal by working with an independent mortgage adviser.
The mortgage myth that getting a personal loan can help if you’re struggling to get a deposit
If you’re struggling to save up for a deposit, it could be tempting to borrow some money. But that doesn’t always play well with mortgage lenders, as you’ll be paying off two big loans, and they might legitimately wonder if you can meet your financial obligations.
However, it’s important to note that this rule doesn’t necessarily apply to gifts, such as money received from parents for a deposit. These contributions aren’t always expected to be repaid.
Nevertheless, it would be best to let your lender know the source of this money, as it’s always good to be open and transparent.
You can’t change mortgage lenders.
Another mortgage myth. You’re free to explore new mortgage options even if you’re already tied to a decades-long one!
Don’t let the length of your current mortgage chain you down.
You can remortgage your property to pay off the original lender and take advantage of more favourable rates with another lender.
There may be early repayment charges if you repay early.
What to do if your mortgage product is expiring
You can only get a mortgage if you have a big deposit
While lenders will ask for a deposit when you buy a property, some may ask for a small percentage, sometimes as little as 5%.
Yes, paying a larger deposit would mean you don’t need to borrow as much money, and the mortgage payment will be lower.
It also means you could be offered a lower rate of interest. But if you can’t pay a big deposit, that doesn’t mean your mortgage application will be rejected.
The mortgage myth that Self-employed people can’t get mortgages.
Not true. While self-employed people don’t have access to documents such as payslips to prove their income, it’s a myth that they can’t get a mortgage.
Just like employed people, they must provide income evidence to support a mortgage application.
A self-employed person can provide alternative types of documents to prove income. Such as an accountant’s certificate to show the income and trading figures.
Along with self-assessment SA302 forms/Tax overviews. These are summaries of the income you’ve reported to the HMRC after submitting your self-assessment tax return.
So, while the process might be different than it would be if you were in regular employment, it’s not impossible.
How can Spectrum help?
Please feel free to contact us today if you want to discuss your mortgage needs now or want to plan your next move. We are Independent and have access to the whole market to find you the right lender and product.
Remember that your home may be repossessed if you do not keep up repayments on your mortgage.
