Mortgage Myths

Common misconceptions and “mortgage myths” are everywhere when it comes to what’s possible and what’s not possible in getting a mortgage. As with every industry, the mortgage market is ever evolving. Therefore, it’s important you get your advice from professionals who actually work in the industry and are up to date with criteria and affordability calculations – rather than some guy in the pub, your dads’ mate or an Instagram ‘guru’ with no qualifications. The reason we say this is not to discredit other’s opinions, it’s just that if you follow advice from someone like this and it leads you into financial difficulty, you have absolutely no recourse to claim any compensation.

So, onto debunking some of the top mortgage myths you may have heard brandished about…

  1. “It’s all about the interest rate”

Perhaps the most common misconception is that the lower the interest rate, the better the mortgage. Now of course if all other factors were the same, of course the mortgage with the lowest rate would be the best there is just so much more to it than this! The type of mortgage, LTV, preferred repayment method, initial term and any other specific features all affect which mortgage is most suitable for you. After this, associated fees and cashback options, as well as the interest rate, determine which mortgage will be the cheapest over the initial term.

  1. “You need two years figures if you’re self-employed”

Another mistaken belief is that self-employed people need two years of accounts before they can apply for a mortgage. Whether you’re a sole trader or director of a limited company, there are banks who will lend off of one year’s figures. For limited company directors, there are also multiple options depending on whether you’re wanting to use your net profit figures or salary and dividends. Most mortgage lenders will require two years figures from self-employed people so if you only have one year your options will be limited. However, it is possible so don’t let it put you off looking for somewhere if the time is right!

  1. “You need a perfect credit score”

This is simply not true. Firstly, there is far too much emphasis placed on your credit score when it comes to mortgage – lenders are not interested in your credit score. They use their own internal scoring system and are concerned with the content of your credit report, not your credit score. Be aware of your credit report and not how well Experian tells you you’re doing out of 999. For people who have had credit issues, there are mortgage lenders out there happy to work with you. If you’ve had IVAs, defaults, payday loans, mortgage arrears, CCJs, credit arrears and various other issues, don’t let it put you off seeing if you can get a mortgage. There are major high-street names who will offer mortgages to people who have had credit issues. Now of course we must stress this isn’t ideal. In some cases it may mean you have to pay a higher interest rate on your mortgage or if the problems are so bad it may rule you out of being eligible completely.

With the misconceptions we’ve discussed, they have generally started from an element of truth. A like for like mortgage with a lower interest rate will be better, most lenders need two years figures for self-employed people and a clean credit report makes applying for a mortgage easier. The issue is how these facts have turned into misconceptions which get thrown around that are simply not true. It puts many people who would be eligible for a mortgage off the idea of applying and therefore stops people getting on the property ladder. If you’ve got any concerns about your situation or want to check whether something you’ve heard is one of the many mortgage myths, please get in touch for professional advice.