Borrowing for the purchase of a property is probably one of the biggest financial steps that most of us will take. Committing to long term borrowing of a substantial sum of money can make people nervous, but the team at Homeline Mortgages are here to help the process run smoothly with as little stress as possible.
Here we bust some myths that have previously caused some of our customers concern. Some of which may surprise you!
MYTH: I can only get a mortgage from my existing bank or lender?
TRUTH: No, no, no – in fact many money saving experts always advise people to shop around, preferably with an independent mortgage broker. Sticking with your existing lender or approaching your bank might appear to be an easy option, but you will be restricting yourself only to the deals they have available. A mortgage broker can access hundreds of different mortgages (including those offered by main high street banks and building societies) securing you the best deal currently on the market.
MYTH: I won’t get a mortgage as I have personal debt and an overdraft
Truth: When applying for a mortgage, any lender will consider all your monthly income and outgoings, including any other loans, financial commitments or an overdraft. This does not mean you won’t be eligible for a loan, as your mortgage will be based upon affordability assessments. At Homeline we will help you work out what you can afford without overstretching yourself before we apply to a lender.
Warning, if you take out a personal loan, car finance or any kind of new credit facility in the run-up to the mortgage application it could impact how much you can borrow from the lender.
Myth: I can’t get a mortgage if I have bad credit
Truth: This is not always the case; some credit issues carry less weight than others and the length of time which has passed between the incident occurring will also be considered when lenders make their decision.
It’s mainly specialist lenders and brokers who offer options for people with history of poor credit, but many high street lenders are beginning to be more open minded towards customers with bad credit. At Homeline Mortgages we get to understand your personal finances prior to submitting a mortgage application; and we will apply to the lenders most likely to give you approval. There are lenders who are willing to offer mortgage deals to those with bad credit, but these may have higher interest rates and fees, and may require a larger deposit.
Myth: I am self-employed. Does this mean I can’t get a mortgage?
Truth: The number of self-employed or freelance workers in the UK is rising year on year, and mortgage lenders are realising this fact. The process for applying for a mortgage can be more complex for those who are self-employed, freelancing or on contract work, but don’t let this deter you. At Homeline we will discuss all the details with you, including your predicted income and your outgoings, and will submit any mortgage application to lenders who look more favourably on those who are not employed on a specific salary. As a rule, most lenders will be looking for at least two to three years of proof of income. Your accountant can provide you with this and can ensure you’re aware how to structure your accounts for both tax purposes and securing a mortgage.
Myth: You must get a new mortgage if you move home
Truth: In fact, you may be able to take your mortgage with you through a process called ‘porting’. The lender will want to value the new property to check they are happy to lend on this home, plus if it’s more expensive you may need to borrow more. To allow this ‘top up’ the lender will need to carry out affordability checks and look at your income and outgoings. Any ‘top-up’ will be based on the mortgage deals available from the lender at the time, not on the same interest rate as your current deal.
Myth: I have a mortgage and I am not moving home, so I can’t change lender
Truth: Most mortgage arrangements mean that you agree to a borrowing term and a rate, however, currently we are seeing some of the lowest interest rates for home owners, and if you have not reviewed your mortgage for the last 5 years, it could be beneficial to switch lender. An independent broker can assess whether this is right for you.
Myth: As a first-time buyer all I need to save for is a deposit
Truth: Stepping onto the property ladder costs more than just the deposit. You will need to take into account other expenses such as solicitors fees, surveys and conveyancing costs, and stamp duty (if applicable) and moving expenses. If you use an independent mortgage broker, they will usually charge a fee (average £495) but can help save you costs elsewhere. We also advise protection cover giving you peace of mind that your mortgage payments are covered in the event of unforeseen circumstances. At Homeline we can also approach lenders who have special deals for first time buyers if we think this is the most suitable option.
Myth: I need to find a property to buy before I can arrange a mortgage
Truth: As soon as you start to think about buying a property, we advise that you chat to a mortgage broker who can help you work out how much you could borrow and help you assess affordability of a loan. An independent mortgage broker will know which lenders are most likely to accept your application. Different lenders offer different deals and different amounts, but your broker can help you obtain an agreement in principle which means you can then go house hunting based on the likelihood of getting the final mortgage approval (subject to surveys etc.).
We hope this has lifted the lid on some common mortgage misconceptions. The team at Homeline Mortgage pride themselves on making your mortgage application as stress free as possible, helping you get the best possible deal for your personal circumstances. If you’re thinking about getting a mortgage chat to us first. We’re the mortgage people who like to say ‘yes’!
Call Homeline on 01202 937444.A fee may be charged should you proceed with a Mortgage or Protection application. Please ask your adviser for further details. Your home may be repossessed if you do not keep up repayments.