Buying a home is one of the biggest financial commitments you will make, so you will need to understand the ins and outs of your property buying journey – legal or otherwise.
Although your estate agent will guide you through the process, it’s important that you’re aware of the fundamentals of your mortgage to ensure you’re getting the best possible deal.
With this in mind, here at Angels Sales & Lettings, we lean on research from Trussle to reveal four common mortgage myths that homebuyers should be aware of.
You can’t get a mortgage if you have an overdraft
If you use an arranged overdraft, it’s possible to get a mortgage. However, lenders will assess how you manage your overdraft and other financial commitments each month.
A lender’s main priority is to ensure that you’re not financially overstretched and can comfortably afford your monthly repayments.
If you’re actively using your bank’s overdraft, or paying one off, this will be considered during the mortgage application. Any money used to pay off the overdraft will be accounted for in affordability assessments.
However, if you take out a personal loan, a car on finance or any new credit facility before applying for a mortgage, this could impact how much you can borrow from the lender.
You can’t get a mortgage if you have bad credit
Contrary to popular belief, you can still get a mortgage even if your credit is below standard. Some credit issues carry less weight than others.
For example, how much bad credit you have and how long it’s been since the incident occurred will all contribute to whether the lender approves your application.
In fact, some high street lenders are beginning to take a more open-minded approach and will consider offering you a mortgage deal even if you’ve got bad credit. There are also specialist lenders and brokers who could help you on your home ownership journey.
Beware, though, that the mortgage deals available to those with bad credit sometimes have higher rates and fees and may require a larger deposit.
You must get a new mortgage if you move home
If you’re moving to a new home, it’s possible to transport your existing mortgage with you – this is known as ‘porting’.
Porting your mortgage involves repaying your existing mortgage on the sale of your current property and resuming the mortgage on the same terms with your new property.
During this process, the lender will need to value the new property to see if they’re happy to lend on it.
If the new property is more expensive and you need to borrow more – known as a ‘top-up’ – the lender will carry out an affordability check to ensure that you can afford the higher repayments. They will also take your income and other outgoings into consideration.
Keep in mind that the ‘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.
You can only get a mortgage from your existing bank
When it’s time to remortgage, staying with your current lender might feel like the easiest thing to do.
However, this can cost you in the long run, as sticking with the same lender (or lapsing onto the Standard Variable Rate) collectively costs approximately two million homeowners almost £10 billion a year.
Consider giving yourself three to six months before your deal ends to shop around, ensuring you find the best possible deal. Some lenders can monitor your mortgage product and let you know when you could save money by switching to another deal.
With the above tips in mind, you can be more knowledgeable about obtaining a mortgage and, in turn, make the buying process a smoother ride. We also have a property jargon A-Z to help you along your journey.
At Angels Sales & Lettings, we offer a range of services for buyers, sellers, landlords and renters in Enfield and Newham. For more information on what we can provide, please contact us on 0800 043 6778.
To find out how much your home could be worth on the current market, you can request a free and instant online valuation.