The Biggest Mortgage Myths!

When You Are are applying for a mortgage as a first time buyer you are going to hear some weird and wacky mortgage myths and misconceptions.

Most of these mortgage myths will come from family members who last purchased a home back in the 90s when things were completely different.

In fact, some of the mortgage myths may have been correct back then however the mortgage market changes daily so outdated knowledge may put you on the back foot if you are a first time buyer looking at getting a mortgage for your first home.

Although we have heard 100s of crazy mortgage myths below we will list the 4 that we hear the most.

Mortgage Myth 1: You Cannot get a mortgage if you are in your overdraft

If you’re in your arranged overdraft, it is still possible for you to get a mortgage. However, lenders will use this as an outgoing when they’re calculating your mortgage affordability.

The lender’s main priority is that you’re not financially overstretched. So, as long as being in your arranged overdraft does not overstretch your finances you can still get a mortgage.

If you’re actively using your bank’s overdraft the lender will ask for it to be keyed into their affordability tests and will calculate a monthly outgoing for it.

Mortgage Myth 2: You Cannot get a mortgage if you have bad credit

Contrary to popular belief, you can still get a mortgage if you’ve got bad credit.

Not all bad credit carries the same weight when the lenders are assessing your affordability. For example, bad credit that was six years ago will not be looked at in the same light as bad credit that was calculated a year ago.

The further away from the bad credit incident, the higher chance you’ve got of being accepted for the mortgage.

If the missed payments on your credit report was a few years ago you may even be able to get a mortgage with some high street lenders as long as you have a big enough deposit! The higher the deposit the more room you will have for missing payments in the past.

If your bad credit is more recent or you have had defaults or CCJ’s you may need to go to a specialist lender who will be happy to lend to someone who has bad credit. If you have to approach one of these bad credit lenders the interest rates tend to be higher that the high street lenders.

Mortgage Myth Number 3: You need a new mortgage if you move home

If you’re moving home and you are in a fixed-rate mortgage, there is an option for you to port your mortgage over, which is in theory, you’re just picking your mortgage up that you’ve currently got, taking it to the new home and then borrowing any additional amount you need to on top of it.

For this to be accepted, the lender would still need to evaluate your new home and the top-up mortgage would need to be with the same lender.

The benefit of porting your mortgage over is that fixed-rate mortgages tend to come with early repayment charges.

You porting your mortgage over means you’re not breaking your current fixed-rate term and, in theory, you can transfer it over and borrow the additional amount without incurring any extra early repayment costs.

Lenders will still assess your affordability when you’re porting your mortgage over. So if you’re borrowing an extra £50,000 and your current mortgage is 250,000, the lenders will calculate your affordability to see if you can borrow that full 300,000.

Subject to that affordability being there, there should be no reason why they can’t move your mortgage over to the new home, as long as they’re happy with the property you’re buying.

Keep in mind when you’re porting your mortgage over the top-up that you’ll be getting to buy the new property is not going to be at the same interest rate that your current mortgage is.

Mortgage Myth Number 4: You have to stay with the same lender when you remortgage

When it’s time to remortgage and your existing fixed-rate deal has expired, staying with the same lender might seem like it’s the easiest thing to do.

However, just because one lender was offering you the cheapest deal when you’ve got the mortgage up doesn’t necessarily mean they can offer you the better deal now.

For the half an hour to an hour conversation with a mortgage advisor, they’ll be able to scour the entire market and see if anybody’s offering you a better deal than what your current lender is.

Consider looking into your mortgage options three to six months before your current mortgage expires. That gives you plenty of time to scour the market, speak to advisors, and get the new mortgage set up before your product goes on the standard variable rate and your payments increase.