Mortgage Myths can easily lead to confusion, especially when you’re preparing to buy a home. From believing you need a huge deposit to assuming your credit score is the only thing lenders consider, some common ideas simply don’t tell the full story. Understanding what is fact and what is fiction could help you avoid costly mistakes.
Mortgage Myths About Deposits
One common myth is that you need a 20% deposit to get a mortgage. While a larger deposit can reduce the amount you need to borrow and may give you access to different mortgage options, it isn’t a universal requirement. Some mortgages are available with deposits of around 5%, depending on the lender and your circumstances.
However, a smaller deposit means borrowing a larger proportion of the property’s value, so it is important to consider affordability and the overall cost of the mortgage.
Your Credit Score Is Everything
Another of the most common Mortgage Myths is that having a perfect credit score guarantees mortgage approval. In reality, lenders consider a range of information when assessing an application.
Your income, regular outgoings, existing debts, deposit and overall financial circumstances can all be relevant. MoneyHelper explains that lenders look at income and spending when assessing how much someone can afford to borrow.
Before applying, it can be useful to check your credit report and make sure the information is accurate.
You Must Use Your Bank for a Mortgage
Many people assume they should take their mortgage from the bank where they already hold their current account. However, you are not generally limited to your existing bank.
Different lenders have different criteria and mortgage products. Comparing available options can therefore be important. Money Helper’s guidance on understanding mortgages and homebuying can also help you understand the wider process.
A mortgage adviser can help you explore options based on your circumstances rather than simply choosing the lender you already use.
A Mortgage in Principle Guarantees Approval
A Mortgage in Principle, also known as an Agreement in Principle or Decision in Principle, can give you an indication of how much you may be able to borrow. However, it is not the same as a formal mortgage offer.
Your final application will involve further checks, including affordability and the property itself. So, treat an agreement in principle as an indication rather than a guarantee.
The Lowest Rate Is Always the Cheapest
One of the more expensive Mortgage Myths is that the lowest advertised interest rate automatically means the cheapest mortgage.
Mortgage fees, incentives, early repayment charges and the length of the deal can all affect the overall cost. Looking beyond the headline rate can help you understand what you may actually pay over the mortgage term.
If you are buying your first home, our first-time buyer mortgage guidance can help you understand the different mortgage options and the application process.
Check the Facts Before You Apply
Mortgage Myths can make an already complicated process even more confusing. Before making a decision, check the facts, understand what you can realistically afford, and consider your wider financial circumstances.
If you’re unsure which mortgage options may suit you, professional guidance can help you compare your choices and understand the costs involved.
Disclaimer
The information in this article is for general guidance only and does not constitute financial or mortgage advice. Mortgage products, rates, fees and eligibility criteria vary between providers and depend on individual circumstances. We recommend speaking with a qualified adviser at Credas Financial before making any mortgage or financial decisions.