5 Mortgage Myths to Ignore

 

Mortgages are just as prone to Chinese whispers, the spreading of ridiculous rumors, and just plain terrible advice as credit cards, credit scores and personal loans.

We're here to clear the air or, in certain situations, just put you back onto the correct track and remind you of the important things.

 

Myth 1 - 95% mortgages are no longer available

 

There are hundreds of them on the market.

While there are still hundreds of 95 percent mortgage offers available (sometimes called as 5 percent deposit mortgages due to arithmetic), they aren't as common as they previously were.

This problem isn't due to a shortage of supplies; rather, since the pandemic, lenders have significantly increased the bar on how financially sound you must be to get one many business listings.

Finally, the affordability of the mortgage, your comfort level with it, and, of course, your credit score come into play.

Although employment is recovering and economic concern is decreasing, the impact of Coved on lenders' propensity for riskier borrowers is likely to keep those 95 percent mortgages reserved for the best borrowers for the time being.

There's no reason you can't receive a 95 percent mortgage if you have a perfect credit history and credit score and can pass the affordability checks with enough of wiggle space.

It would be difficult to make it much simpler to acquire a property with a modest deposit without choices like the government's Help to Buy Scheme, which may make it even more inexpensive.

This origin of this is uncertain. Probably someone who hasn't looked up mortgage information since the government triumphantly announced a 95% mortgage guarantee plan for lenders in the budget in March.

 

Myth 2 - You should take out the largest mortgage you can

 

This isn't quite as true as it formerly was.

This isn't exactly a myth; rather, it's a modification and a caution. When it comes to buying a property, we all do the same thing: we acquire the largest mortgage we can afford. What has changed is the meaning of "affordability."

While this may have been a legitimate argument in the past, when property prices increased in lockstep with salaries, making mortgages more manageable over time, that is no longer the case business listings.

Now, if you take on a large mortgage and then have a recession, higher interest rates, or even a pandemic that prevents you from working, you might find yourself in serious trouble if you're already stretched too thin.

One of the reasons lenders are becoming tougher is that affordability assessments must consider not just whether you can afford your mortgage today, but also what would happen if your payments unexpectedly increase.

When it comes to re-mortgaging, just because you can obtain a fixed-rate arrangement for fewer than 2% now doesn't imply you'll be able to get one in two to five years.

It's critical to speak with a mortgage advisor about realistic borrowing options depending on your current and future circumstances.

You should consider long-term affordability rather than what you can afford right now.

The origin on this is the result of outdated thinking from a bygone period.

 

Myth 3 - The best mortgage is always the cheapest

 

Not only does the interest rate have a role, but so do a variety of other factors.

Of course, a low-cost, low-interest mortgage is desirable, but you must also consider mortgage costs, appraisals, and the kind of mortgage. Is it a Fixed-rate? Tracker? Discount?

If you have a tracker mortgage because it is the cheapest choice, but the Bank of England gradually boosts interest rates over a year or so, that low rate may no longer be so low, and you may find yourself paying more than you can afford, throwing all your meticulous planning out the window free business listings.

Likewise, since you can acquire a two-year mortgage for under 1% right now, you could discover that paying a bit over 1% but not having to pay £1,000 or more in fees is preferable. In one way or another, mortgage lenders will always earn money.

It's also important thinking about early repayment penalties and your choices for dealing with overpayments. When things are good, overpaying on a mortgage is a terrific method to reduce your overall mortgage debt, but certain lenders will make you pay for it.

Exit costs are also essential long-term considerations, particularly if you don't plan on living in the home long-term and are only utilizing it as a stepping stone up the property ladder.

Low rates are desirable, but they are not sufficient. You must consider the larger picture.

The origin of this is the majority of it is a marketing technique. Lenders, after all, want to earn money, so their advertisements emphasize interest rates "We're cheaper!" rather than other factors "But we'll still make money out of you".

 

Myth 4 - Your bank will provide you with the best mortgage possible

 

Not all of the time.

Why would you take the only route you know when there are so many other possibilities when your mortgage is one of the largest investments you'll ever make?

When it comes to mortgages, choose the appropriate one might save you hundreds of pounds over the life of the loan. Choosing the incorrect one might cost you hundreds of dollars more than necessary.

Take a look at your present bank, if you haven't already. They may provide competitive pricing, but how can you tell if they are if you don't know what their competitors are doing?

Make an effort to be comprehensive. Examine all of your possibilities and, if you're not sure what you're doing or can't make up your mind, go to a mortgage broker. They'll be able to not only explain everything that's going on, but they'll also be able to assist you with paperwork, walk you through the process, and provide you with bargains that aren't accessible in high-street lenders' branches.

Going with a broker may cost a few hundred pounds, but you may save tens of thousands of pounds with their help.

If you believe the myth and head directly to your bank without looking around, you might end yourself paying a lot of money.

The origin of this is unknown. It's most likely a bank.

 

Myth 5 - If you're self-employed, you won't be able to secure a mortgage

It's possible, but it's a little more difficult.

During the pandemic, lenders grew prickly, taking many of their products off the market and deciding to only lend to the most creditworthy, similar to the 95% mortgages.

For them, that means individuals with the highest credit scores, the longest credit histories, and the most consistent income to pass affordability tests not just narrowly, but easily.

While individuals in full-time employment receive pays lips to establish their income, the self-employed do not, making it more difficult to prove your capacity to buy a mortgage. This was the case even before the pandemic, which affected many self-employed people.

Again, speaking with a mortgage broker is probably the best option. Look for a broker that specializes in self-employed applications. They'll be able to inform you exactly what you need to know in order to obtain the mortgage you desire.

You can apply for any mortgage that others can if you're self-employed. If you don't want to go via a broker, certain lenders specialised in mortgages for self-employed people, so it's worth contacting them first.

The origin of this is may be someone who is self-employed and has difficulty to secure a mortgage, or it could be a scaremongering news report.