When you start to think about buying a property and getting a mortgage, it can be a daunting period if you don’t arm yourself with plenty of information. There are a lot of myths about mortgages that simply just aren’t true and to help give you the right information, I explain some of these below:
Myth: Lenders only lend to people in full-time work
Truth: Provided your income is stable and sufficient you are likely to be able to get a mortgage even if you are not in full-time work. There has been a huge rise in freelancers and contract working in the UK over the last few years and even more so post-pandemic, so lenders are taking more of an individual approach and will look at everyone’s employment situation in detail and fairly.
Myth: Your credit rating needs to be perfect
Truth: If you have a bad credit history, it certainly will make it more difficult for you to get a mortgage, but rest assured that it does not have to be perfect! The important thing is that you have a credit rating in the first place. If you’ve got an excellent record, then well done for being money-savvy. But if you’ve got some improving to do, then fear not, because we’ve put together some simple tips that can help you to boost your rating in the next 6-12 months, which you can find out more about in my article here.
Myth: A lower rate means a better deal
Truth: This is not always the case. Some deals with low rates can come with high arrangement fees and therefore affect the total amount that you pay. When you are looking for a mortgage deal, it is important to work out the overall cost of the deal and work the arrangement fee into this. Consider if the arrangement is a tracker mortgage or fixed rate, as this will indicate if the low rate will change in the near future and possibly move to the standard variable rate. There are also other factors to consider such as Early Repayment Charges or the loan-to-value ratio.
Myth: You should wait until you’ve found your new home before looking for a mortgage
Truth: This is not true at all, the sooner that you start looking for a mortgage, the better! In an ideal world you will already have a mortgage in principle in place before you even look for a house as it is best to know how much you can borrow and what your budget is before you even begin house hunting. With the current market, many sellers now have so many offers that they are only accepting offers from buyers who are in a position to progress asap and a part of that is having the mortgage in principle. Although you don’t necessarily need a MIP to make an offer on a property, most sellers and agents won’t take you seriously without one. Having one shows that you are serious about purchasing and can sometimes speed up the house-buying process.
Myth: The best deal will be with your current lender
Truth: Your current lender will try to offer you a mortgage when you move home, but there are thousands of different deals available, and it often pays to shop around to get the best mortgage deal. As an Advisor, I search the whole of the market and take into account your own current circumstances to make sure you are getting the best deal that will suit your individual needs.
Myth: Young people can’t become homeowners
Truth: I often get clients coming to me saying they want to buy their first home but only have a small deposit. If you are in that situation, you are not alone. Thousands of other homeowners find themselves in that situation and have managed to get their first foot on the property ladder. There are lots of options and this article talks you through what you need to do. There is also the option of Joint Mortgages and Joint Borrower Sole Proprietor Mortgages.
Myth: You can no longer get 95% mortgages
Truth: There are 95% mortgage available. There are also schemes such as the Help To Buy which was put in place to help more people become owners of new build houses. It is a loan from the government that you put towards the cost of buying a newly built home. You can borrow a minimum of 5% up to a maximum of 20% (40% in London) of the full purchase price of a new-build home.
The equity loan, the deposit that you have saved, and the repayment mortgage will cover the total cost of buying the home. You won’t pay any interest on the equity loan for the first 5 years, you only start to pay this in year 6 on the equity loan amount that you borrowed.
At KB Mortgage Services, we can help find you the best deal and save you money over the term of your mortgage.
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Note: Your home may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment to your existing lender if you remortgage. Second charge mortgages are arranged by introduction only.
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