Getting a mortgage can seem extremely complicated. With so much potentially misleading information out there, how do you know what’s fact or fiction? And how do you know what’s right for you?
Knowing your circumstances and what products are applicable to your needs & objectives are the most important aspects of our role as your mortgage broker.
Here, we’ll clarify some of the most common myths and misconceptions, giving you the clear, straightforward answers you need to make confident decisions.
Myth 1: “You need a big deposit to buy a home”
This is particularly relevant for first-time buyers, who feel they are trapped by endlessly saving as large a deposit as possible.
Many believe that making a new property purchase requires at least a 20-25% deposit. This can feel like a significant barrier & made worse during times of fast-rising house prices.
Fact 1: There are mortgage products available with lower deposit requirements
Many lenders offer mortgages with as little as 5% needed for a deposit.
This is likely to be relevant to first-time buyers, permanent employee(s), housing purchase schemes (such as Help to Buy), and other specialist products provided by certain lenders.
If saving for a deposit is challenging, consult with a mortgage broker, as we can advise on lenders and schemes that align with your financial situation.
Myth 2: “Self-employed people can’t get a mortgage”
Sole traders & LTD company owners often hear they cannot get a mortgage.
Many people believe that unless you receive a payslip or steady income source through standard employment, then lenders will not consider your income to support mortgage repayments.
Fact 2: There are specialist products available & certain lenders excel in mortgages for self-employed borrowers
Whilst some lenders have restricted product offerings & particular criteria for self-employed applicants, there are still plenty of options available to you from a range of different banks & building societies.
The key is knowing exactly what evidence you need to supply (typically at least two years of trading history) and what details the lender requires.
Having an accountant with an accepted qualification, who verifies your tax returns, can increase your chances of getting a mortgage application accepted.
With the help of a mortgage broker, self-employed individuals can find lenders that specialise in considering non-standard income sources.
Myth 3: “You should always pick a fixed-rate mortgage option”
More often than not, people choose a fixed-rate mortgage because of the stability and certainty of payments for the initial rate period. This can allow households to plan personal finances accurately into the immediate future.
This has lead many people to believe that fixed-rate options are the “best” or “only” option available.
Fixed-rate mortgages are not the only choice.
Fact 3: Variable or tracker mortgage rates could be more beneficial for you
For some situations, not choosing a fixed-rate product is exactly what you need.
An illustrative example could be a Base Rate tracker that follows the Bank of England’s Base Rate, plus a certain margin (perhaps + 0.25% to 1%). If fixed-rate options were averaging 5.25% and the current Bank Rate was 5% for a Base Rate tracker product with +0.25% margin, then at first the fixed-rate & tracker are identical (5.25% & 5% + 0.25%). However, if the Bank Rate were to fall to 4% within the first 12 months, then the tracker rate would drop to 4.25% but the fixed-rate would remain at 5.25%. Meaning the tracker allows you to take advantage of any decreases in the Bank Rate. (Importantly, if the Bank Rate were to rise, then your mortgage costs would also increase).
Variable & tracker products typically also have minimal Early Repayment Charges, giving you the greatest flexibility if you know you might be moving home soon.
If flexibility and potentially lower rates appeal to you, discuss your options with our mortgage broker, who can guide you to the best product for your situation.
Myth 4: “You need perfect credit to be approved”
A mortgage is the largest borrowing in most people’s lifetime. So it makes sense that many think that only a good credit score will get your mortgage accepted.
Some potential mortgage borrowers also have significant credit issues, such as County Court Judgements (CCJs), defaults, Individual Voluntary Arrangements (IVAs), missed payments, and bankruptcy.
While a good credit score can help you secure favourable mortgage terms, you don’t need perfect credit to get a mortgage.
Fact 4: There are certain lenders that accept borrowers with adverse credit
Many lenders offer specialist products tailored to individuals with lower credit scores or significant credit issues.
Typically these products are more expensive and require a higher deposit.
Added to this, the application process is usually more intensive. More questions are asked by the lender and more evidenced is required during the underwriting assessment.
A mortgage broker can help you to navigate these more difficult applications by assessing your credit history and recommending specific lenders that might consider your advised application for mortgage funds.
Myth 5: “Once you receive your mortgage offer, you’re locked in”
Receiving your mortgage offer can be the most exciting part of the property-purchase process.
Some people think that what’s written on the mortgage contract is ‘set in stone’ and cannot be altered under any circumstances. This can leave some borrowers to panic if something changes prior to completion.
Good news is that there could be scope to amend an existing mortgage offer.
Fact 5: You can often update your mortgage offer prior to completion
Mortgage offer letters come with a limited time period & conditions that will make the mortgage offer valid if nothing changes.
However, there is generally a simple process to make specified changes to a mortgage offer such as amending the rate, requesting a change to the loan amount, or updating property details.
This is why it is very important to stay in touch with your mortgage advisor even after you’ve received your offer letter.
Mortgage brokers stay updated on market changes and can help you switch more easily – saving you time, money, and potential stress.
At SWM we’re here to guide you through every step of your mortgage journey. Understanding what’s true and what’s a myth can save you money & give you more confidence with your personal finances.
Working with us you’ll always have a trusted expert to voice your questions to us at any time during & after the mortgage journey.
Reach out to us if you have any further questions.