Debunking Mortgage Myths

Securing a mortgage can be difficult and confusing at the best of times. And if you’re stepping onto the property ladder as a first-time buyer, understanding all these new processes can feel like information overload; but on top of all that, you’re expected to understand what’s actually true and what’s a mortgage myth.

Separating the truth from the fiction isn’t the easiest, especially when some of these mortgage myths have been around since your parents bought their first house! Well luckily, we’re here to bust the most common mortgage myths so you can put your best foot forward when it comes to securing your first home!

MYTH: You can’t get a mortgage with a bad credit rating

It’s true that you might find it harder to get a mortgage with a poor credit history, but your credit score does not need to be perfect by any stretch of the imagination. The severity of your credit issues (along with how recent they are) will determine whether or not you’re able to secure a mortgage, but even if you’ve been told you’ll never get a mortgage, speak to us.

Our advisers work with specialist brokers and lenders who work with people in particular situations to help them secure mortgages when others may not be able to. Also, there’s a huge difference between having a bad credit history and having no credit history!

Credit score/rating is absolutely a factor that determines whether you may be approved for a loan (and will also affect the interest rate you’re offered) but a perfect, high-scoring credit rating isn’t necessary.

MYTH: A lower interest rate will mean a cheaper mortgage

In an ideal world, you want to get the lowest interest rate you can, as it means you’re repaying less back to the lender. But there are other factors that will count towards your monthly mortgage repayments, and will therefore affect how expensive your overall mortgage is. You shouldn’t assume that the mortgage option with the lowest interest rate means it will be the cheapest overall!

One of the biggest factors to consider will be the cost of actually getting the mortgage. Many mortgage deals will come with fees, such as product fees and valuation charges. A mortgage with a slightly worse interest rate but lower fees can often work out cheaper than a competitive rate with high fees attached to it.

Another factor is whether you’ve chosen a variable mortgage or a fixed-rate mortgage, as this will determine whether your interest rate could change. So although the rate you were initially quoted may look like a great deal, if it’s a time-limited fixed-rate mortgage, you may find then when you’re put on the lender’s standard variable rate, your rates are much higher than comparable mortgage deals.

MYTH: There’s no point looking into mortgages until you’ve found the home you want to buy

If you choose to meet with a mortgage adviser beforehand, you’ll be able to get a much more realistic idea of the process, any fees involved, and what you can afford within your budget. They can also give you advice on the types of property you might be considering and any government-backed schemes that might be able to help. Remember, mortgage advisers know the market better than anyone!

You can also discuss options for a mortgage Agreement in Principle. AIPs are time-limited, and tend to be valid between 30-90 days, but will act as a ‘provisional’ agreement between you and your chosen mortgage provider. It also allows things to move much quicker should you have an offer accepted on a house you love!

Although there’s no requirement to apply for a mortgage until you’re in a position where you’re ready to buy, we’d recommend exploring the market and having a look at different options to get an idea of what you can afford in your budget.

MYTH: It’s impossible to get on the property ladder if you’re young

For prospective homeowners in their 20s and 30s, the thought of securing a mortgage can feel like an impossible goal. Saving a deposit substantial enough to secure your dream home can be the biggest barrier, but there are more options now to help young people secure better mortgages.

You may find a lender willing to provide you with a 95% LTV mortgage, meaning you only need to provide a deposit of 5% of the property value. You could also consider speaking to your lender about a guarantor mortgage, where a family member agrees to pay your mortgage if you’re not able to.

There are also lenders who will allow you to borrow the money for your deposit, either as a personal loan or from a family member. You’ll need to prove you can afford the loan repayments alongside the mortgage and your other commitments. If you’re considering this option, you should speak to a mortgage adviser first to make sure it will work for you.

You can contact us to better understand your options if you’re feeling like securing a mortgage as a young person is proving impossible.

MYTH: Mortgage rates are sky high at the moment

In today’s climate, everyone is being conscious of money and it seems like the prices of everything just keep going up. However, the myth that mortgage rates are sky high at the moment is exactly that – a myth.

Over the last 25 years, the average cost of borrowing on a 5 year basis at a 90% LTV has been at a rate of 4.34%. Coincidentally, this is close to the best rates available on the market today. So, while it may seem impossible to secure a mortgage at the moment, it really isn’t. Speak to us for more information if you’re worrying about getting a mortgage.

If you’re a first time buyer and you’d like to learn more about everything you need to know before buying your first house, why not check out some of our handy articles:

If you’re just beginning your journey to homeownership, Key Solutions can help you get well on your way. To find out how much you can borrow, have a look at our mortgage calculator today or contact a member of the team.

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About Key Solutions

Here at Key Solutions we believe taking out a mortgage should be easy. Why shouldn’t it? So when people say buying a home or getting a mortgage is one of the most stressful things ever, we say, come and speak to us.

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