Mortgages are often surrounded by a cloud of misunderstanding, causing many potential homeowners to hesitate. Let's dispel some common mortgage myths and shed light on the truths behind them.
Myth 1: You Need a Perfect Credit Score.
Truth: While a higher credit score can secure better rates, it's not an absolute necessity for obtaining a mortgage. Lenders consider a range of credit scores and other factors like income and debt-to-income ratio.
Myth 2: You Must Have a 20% Deposit.
Truth: While a 20% deposit can help you gain a mortgage easier and have better rates attached there are many products available that allow for much lower deposit, some as low as 5%.
Myth 3: A Mortgage Certificate or Agreement in Principle Guarantees a Loan.
Truth: Pre-qualification is just an initial step. It gives you an idea of what you might be able to borrow, but it's not a guarantee. The actual approval comes after a more thorough check of your situation has been made during the lead up to fully submitting your application to a the lender.
Myth 4: Fixed-Rate Mortgages are Always the Best.
Truth: While fixed-rate mortgages provide stability in payments, variable-rate mortgages (VRMs) can be beneficial, especially if you plan to sell or refinance before the rate adjusts.
Myth 5: Remortgaging is Always Beneficial.
Truth: Remortgaging may offer benefits like lower monthly payments or a shorter loan term, but it's not always the right move. Consider application and lender costs, the length of time you plan to stay in the home, and the terms of the new loan.
Myth 6: Renting is Cheaper Than Buying.
Truth: Renting may have a lower upfront cost, but owning a home can be a smarter financial decision in the long run. Homeownership allows for building equity, potential tax advantages, and stable monthly payments.
Myth 7: Self-Employed Individuals Can't Get Mortgages.
Truth: It's a common misconception that self-employed individuals face insurmountable obstacles in getting a mortgage. While the documentation process is more rigorous, many lenders are adept at working with self-employed applicants.
Myth 8: All Lenders Offer the Same Rates.
Truth: Mortgage rates can vary significantly between lenders. It's crucial to shop around and compare offers to ensure you're getting the best deal.
Understanding the realities of mortgages can empower you to make informed decisions. Don't let myths deter you from exploring your options. Consult with a mortgage expert to guide you through the process and find a solution that fits your unique financial situation.