For many people, obtaining a mortgage is a rite of passage. No doubt as soon as you told your friends/parents/colleagues that you were planning to get onto the property ladder, you were inundated with advice.
Some of that advice will be good. Some of it…well, it might have been the best thing at the time, or for the given situation, but that doesn’t mean it’s right for you.
As mortgage advisers, we hear a lot of myths about mortgages, so we thought it was about time we put some things right.
Myth: Your bank is the best place to go for a mortgage
This is one that comes up often, and we get it. You’ve probably been with your bank for several years, they know your financial history, and you may have even borrowed from them previously. That doesn’t mean they’re going to give you the best deal.
There are over 100 mortgage lenders in the UK, with around 4,400 different products. The average first-time purchase price is £281,900 and eight in 10 people view at least five homes before making a decision. Doing your research to ensure you get your dream house is vital – but you need to do the same for your mortgage.
The easiest way to do this is to engage with a whole-of-market mortgage adviser who’ll be able to access the entirety of the market and find the best deal based on your circumstances. However, if you’d prefer to do some research by yourself in the first instance, we recommend Money Saving Expert.
Myth: You don’t need to speak to a lender until you’ve found a house
Before you settle on the property you want to buy, it’s worth understanding how much you can afford to borrow. Online tools can help to give you an estimate, as can a mortgage adviser. You may even want to get an Agreement in Principle, which involves a soft credit check that will have no impact on your credit score. This will give you a clearer idea of how much you can borrow.
A mortgage adviser can also run an Agreement in Principle at the price you are prepared to pay for the property. This puts you in a prime position if there are any other prospective purchasers.
Myth: Mortgage advisers are biased
We are fee-free mortgage advisers, which means that there’s no cost to our clients when they work with us. Instead, we get a commission from the lender on completion of your mortgage – essentially, they pay us for arranging the deal.
This leads some people to think we will always suggest the lenders that give us the best commission, but this isn’t true for one simple reason: all lenders pay us almost exactly the same rate of commission.
Typically, we are paid between 0.34-0.35% of the loan amount when we arrange a residential mortgage. We also have to disclose anything we are being paid when recommending a mortgage.
Even if they didn’t, we’d still want to make sure you had the best deal so that you keep coming back to us, but hopefully that is enough to reassure you.
Myth: You can only get a mortgage if you’re in full-time work
Lenders want to know that you have a stable income. If you are self-employed or are a contractor or freelancer, for example, this can be more difficult – but it’s definitely still possible. You’ll need to prove that you can afford to repay the amount you want to borrow, the same as everyone else does.
A mortgage adviser can be really valuable to someone who works flexibly as we know exactly what lenders are looking for and how to help you secure the best deal.
Myth: Interest rates are too high to secure a mortgage
The Bank of England’s base rate of interest is currently 2.25%, and we anticipate that this will rise further to help manage inflation. Lenders use this to determine their own rates of interest, meaning that a mortgage offer you receive now is likely to have a higher rate of interest than if you had applied six months ago.
This might make it more difficult for you to borrow, or that you cannot afford to borrow as much as you planned. However, there are plenty of available mortgage products so, in most cases you can still move forwards with your plans. Remember that most mortgage offers are valid for six months, so you may have no reason to worry. If you’re concerned about how best to proceed with your mortgage, contact us for free, unbiased advice.
