8 Busting Mortgage Myths For First Time Buyers
by Julie Delaney – Senior Lending Manager | Walsh Group
Applying for a mortgage can often seem like quite a daunting experience, especially for first time buyers who have not been through the process before. As part of my role with Walsh Group, I regularly meet clients seeking financial advice for a mortgage application. Many people will have preconceived understandings of what you can or can’t apply for, or how the entire process works, and unfortunately, so many of these ideas are mortgage myths.
With this in mind, I have put together a list of the eight most common mortgage myths that we hear from clients, and proper explanations of why they are simply not true.
Myth 1 - My rent is not take into account when I apply for a mortgage.
This is one of the most common mortgage myths. On the contrary, your rent is taken into account when you are being assessed for a mortgage. It shows the lender, what you might be able to afford in mortgage repayments and also demonstrates your repayment capacity, which is a huge factor an your mortgage assessment.
Myth 2 - I have to wait until I find a property before I can apply for a mortgage.
No, you don’t have to wait until you find a property before applying for a mortgage. The lender will give you an “Approval In Principal” for a mortgage amount before you have started your house hunting. This will last for 6 months.
Myth 3 - Lenders do not want to lend to single people.
This is also untrue. The amount you can borrow is based on a number of factors, including your income, demonstrated repayment ability and how much you have saved. Whether it is a single or a joint application, this does not matter.
Myth 4 - I have to show that I can pay back a loan before you apply.
This is not the case, the less commitments you have, the more disposable income you have to pay towards your mortgage. Equally, if you do have a personal loan, that is okay, provided your income will show that you can meet all financial commitments.
Myth 5 - If my mortgage approval runs out, I will have to go through the whole process again.
No, if 6 months have passed, and you have not found a suitable property, the lenders will extend your approval. This is really easy if your circumstances have not changed.
Myth 6 - The lenders do not want to lend to self-employed people.
This is not the case at all. The lender will take the average of your last 2 years tax return, you can provide the lender with the Form 11 – Chapter 4 form to determine this figure. Provided your income figures are in order, they use the same multiplier and other assessment factors to assess your case, as a PAYE worker.
Myth 7 - The lender only wants to see your main bank account statement.
To get a full understanding of your financial situation, the lender will want to see all of your bank accounts statements, including Revolut statements for the last 6 months. If you have numerous accounts, then you must provide the bank statements for all of them.
Myth 8 - I will need a 20% deposit for the house purchase.
No, this is untrue. For first time buyers and second time buyers, the deposit required is 10%. This means that first and second time buyers will be able to borrow up to 90% of the value of a home.
I hope this explains just some of the mortgage myths that we hear on a regular basis, and puts your mind at ease. While applying for a mortgage can be complex, it doesn’t have to be headache and should be a smooth process.
If you would like further information about mortgage applications, financial planning or even if you have any questions about any other mortgage myths, please feel free to get in touch and we will certainly assist you in any way we can.