5 first-time buyer mortgage myths

When you’re a first-time buyer there is a lot for you to think about. You’re entering unchartered territory, so it’s unsurprising that there are things you won’t have thought about.

And it’s those uncertainties that mean first-time buyers are giving up on their plans to buy a home.

Researchers earlier this yearsurveyed first-time buyers and found that believing myths from others meant they didn’t pursue their home-buying dream.

The survey found that:

• 65% thought having bad credit meant they wouldn’t get a mortgage.

• 62% believed you must have a deposit of at least 10%.

• 50% said the maximum they could borrow was 4 or 5 times their income.

• ·Half also thought that the lowest interest rate automatically meant the cheapest mortgage overall.

• ·40% thought the best mortgage they could access was with their current bank.

• ·25% said they thought they couldn’t explore mortgage options until they found a property to buy.

All those points really are just myths. We’ve already shared on a previous blog that, depending on your circumstances, you might be able to secure a mortgage with a deposit less than 10%!

5 first-time buyer mortgage myths

The amount you require as a deposit isn’t the only mortgage myth that first-time buyers believe. Here are 6 other mortgage myths that first-time buyers often believe. We understand why you might believe them as the misconception can come from others. But our advice is to always speak to someone who is qualified to talk about mortgages! Let’s explain more…

1. You must get your mortgage from your bank

One of the main misunderstandings is that you need to apply for a home loan from the bank you have your current account with. While there is nothing wrong in speaking to your bank about a mortgage, you might not get the best deal for you.

That is because your bank can only sell mortgage products that they sell. Some people look to comparison websites. These give you access to a wider range of products. You may find a good deal. But the biggest problem with comparison sites is that there is small print that you may not understand. Some of the conditions could mean you’re penalised for making overpayments, for example. That’s where a mortgage broker can help. And that brings us to the next myth…

2. A mortgage broker is expensive and unnecessary

One survey found that almost 20% of first-time buyers didn’t approach an advisor before taking out a mortgage.

But one of the reasons mortgage brokers are worth using is that they can access a wider range of mortgage products. There are many products and lenders that a buyer just can’t access, which include mortgages for specific circumstances or properties.

And then there is the experience. As we mentioned about comparison sites, there are often requirements and small print that you may not fully understand. That can mean you end up with a mortgage that costs more than you think. Or you may end up tied in for longer than you wanted with high fees when you remortgage.

You might believe, or have been told, that because mortgage brokers are experienced, they cost a lot. That’s not necessarily the case.

And because we may access better deals, it can help save a lot more than our initial fee over the mortgage period. So, it really can make sense to use a mortgage broker!

3. You need to find a property before getting a mortgage

Almost a quarter of first-time buyers who were questioned in the survey we mentioned earlier believed they couldn’t look for a mortgage until they found their first home.

The reality is that there is a lot to think about before you start searching for a property. First of all, it’s best to know how much you might be able to lend early. There’s no point going to search for a property only to find you won’t be able to get a mortgage to cover the purchase!

It also takes a bit of time to get everything together for your application. That means it makes sense to look for a mortgage before your first property.

We can help you understand and arrange an Agreement in Principle, sometimes called a Decision in Principle or Mortgage in Principle. It isn’t an offer, but the lender will give you a statement or certificate to say they are willing to lend a certain amount. Find out more about the Agreement in Principle in one of our earlier blogs.

4. The lowest interest rate means the cheapest deal

You might think that if you find a mortgage with a lower interest rate, you’re getting a cheaper deal. It’s easy to think that. Afterall, if you are paying back less in interest, you end up with more money.

But there are other points to think about. For example, the lower interest rate mortgage may come with higher fees. You might also need to pay high repayment charges when you remortgage. Headline-grabbing low interest rates might understandably catch your attention. But like lots of things in life, if it sounds too good to be true, it possibly is.

Speaking to someone who understands the small print, such as a mortgage broker, makes sense. It means you don’t end up paying more than you expected.

5. You need a good credit score before securing a mortgage

Another myth is that if you have a bad credit score you can’t get a mortgage. That’s not necessarily the case. Some mortgage lenders specialise in offering home loans for people with a credit score that is low. And there are things you can do before applying for a mortgage to improve your chances. We’ve looked at this before, so check out the blog here.

What should I do?

If you are a first-time buyer and are unsure about the myths and facts, speak to our experienced team today without obligation or fees.

Your home may be repossessed if you do not keep up repayments on your mortgage