If you are thinking of buying a property with a mortgage, you may have questions about some of the things you have heard about mortgages. We take a look at some of the most common mortgage myths.
1. You need to find a property before you start thinking about a mortgage
While you will not be issued with a formal mortgage offer until you have found a property to buy, you should still make sure that you have applied for a mortgage offer in principle early on. By researching the mortgage market in advance and making sure that you are likely to be eligible for your chosen product, you will save time later on. You will also be able to check what paperwork your lender needs and make sure that this is organised and available. When you are ready to make an offer on a property, having a mortgage offer in principle will demonstrate to the seller that you are a serious buyer and that you are ready to proceed.
2. You can’t get a mortgage with bad credit
Your credit score will be taken into account when you apply for a mortgage, but it does not need to be perfect. There are steps you can take in advance to try and improve your rating, including:
- Make sure that you are on the electoral roll
- Pay your bills on time, to include credit card and other loan payments
- Obtain a copy of your credit rating from the main credit rating agencies, check for any errors that need to be corrected and deal with this now
- Don’t apply for new loans or credit cards right before applying for a mortgage
- While you need to have at least one credit card that you use to demonstrate that you are able to make payments on time, if you have several unused cards, you can cancel them
- Cut any financial ties you have with other individuals who do not have good credit ratings
3. You need a 10% deposit
Although you may have access to some better mortgage deals if you have a bigger deposit, there are usually some loans available if you only have 5%.
4. Bills are not taken into account by lenders
Your lender will want to look at all of your monthly outgoings when assessing you for a mortgage. This includes expenditure like energy bills and food shopping as well as loan, hire purchase and credit card payments. This will be part of their overall examination of your financial situation so that they can be confident that you will be able to afford mortgage repayments, even if circumstances change.
5. You need to have a full-time employed position to apply for a mortgage
In fact, part-time work is taken into account by lenders. Self-employed individuals and business owners can also apply and will usually need to provide three years’ accounts by way of evidence of their income.
6. A mortgage lasts for 25 years
You can choose how long you would like your mortgage to last, within reason. If you are able to make larger monthly payments, you will be able to reduce the amount you pay overall by taking out the loan over a shorter period. Alternatively, there may be an option to take out a mortgage over a longer term, although you need to be aware that this will substantially increase the amount that you repay.
7. A mortgage is more expensive than renting
With rents currently quite high, it is not necessarily the case that a mortgage is more expensive than renting. Depending on the amount of deposit you have available, you may find that a mortgage is not dissimilar to rental payments. You will also have the benefit of owning your property at the end of the mortgage term, making it more of an investment in your future.
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