Buying a home is one of the biggest decisions anyone can make in their lifetime. The minute you tell anyone about your decision, no doubt you’ll receive endless amounts of tips and advice. Although well-intentioned, many of these tips turn out to be myths and we’ve heard our fair share of them! In fact, if we had £1 for each myth we’ve heard from first-time buyers, we’d probably have a deposit for a home or two 😊
MYTH: You need to have a 20% deposit to get a mortgage
Of all the myths, this is the most widespread as this was true many years ago. You had to have a hefty deposit of 20% to get a mortgage, but this is no longer the case. Since the introduction of equity loans and other schemes aimed at first time buyers, many lenders have adapted and now offer several options where mortgages are available with a 5% deposit. You do not need a 20% deposit anymore and saving up a deposit is far more achievable. Based on average property prices in London, a 5% deposit is £24K, versus a 20% deposit which is £96K.
MYTH: I don’t need to speak to a broker until I’m ready to apply
This is false and is bad practice when searching for your home. Imagine after a long and exhaustive property search, you find your dream home, negotiate a price and only then find out you can’t afford it. Confirming your affordability with a broker will keep your property hunt to homes that realistically fit your budget and help you avoid this disappointment. Once you start viewing homes, we recommend speaking to a broker to confirm your affordability. You’ll be able to improve and adapt your search based on the results.
MYTH: You need to have a really good credit rating to get a mortgage
There are many specialist lenders who focus on individuals with a poor credit rating. However, the products and interest rates available will be more costly. Having a great credit score means you will be able to unlock better products and interest rates. It might help you afford more, or access lower monthly payments, so it’s worth putting time and effort into getting your credit score up. However, thanks to specialist lenders and products, even with a poor credit rating, you can still get a mortgage. A mortgage broker will be able to recommend an appropriate service for you.
MYTH: Estate agents are a neutral source of information
Estate agents work on behalf of the seller, not the buyer. When they sell the home, they will receive a commission from the seller. However - don’t underestimate their power. If you’re able to build rapport with an estate agent, they can be one of your greatest allies (after Proportunity 😉) and can provide valuable information.
This information can be crucial in negotiating a better price.
MYTH: You'll get the best deal if you get a mortgage from your bank
There’s a reason why you’re bombarded with letters, brochures, and emails offering free mortgage advice by your current bank. That reason is your bank doesn’t want you to go anywhere else when you decide to make your biggest purchase. As a home buyer, you have the flexibility to choose any lender. This could be a bank, building society or any other loan provider.
It is up to you to find the best products available. You can search for the best financial products by yourself using websites such as MoneySuperMarket or online brokers such as Habito and Trussle. If you need a little help, there are many independent mortgage brokers who can advise you based on your unique circumstances. Most banks offer free mortgage advice who can only offer their products. Speaking to a “whole of market” broker will help you assess all the options available to you.
MYTH: It’s cheaper to rent
Get your calculators out! There is endless debate as to what is cheaper, and the short answer is that it is definitely possible to have mortgage repayments lower than what you’d pay for rent. More importantly, the benefit of a mortgage is that each monthly payment you make increases your equity in the property, whereas with rent, you’ll get no benefit at the end of your tenancy.
MYTH: If I buy, I will be locked in the same house in the same area forever
After buying a home, many people feel they are locked for the entire duration of the mortgage term. There are a few options which include refinancing (where you replace your existing mortgage with different terms), selling the property, or converting your home into a buy to let that give you the flexibility to keep your costs down, and move into better areas or bigger properties. On average, home buyers will make three purchases during their lifetime. While our parents and grandparents may have stayed in the same home for 40 years or more, nowadays it’s pretty unusual to stay in the same home forever and you shouldn’t see yourself as tied to the home you are buying.
There you have it, the most common myths debunked! At Proportunity, we strongly believe it is possible to buy smarter by making a logical, informed decision rather than choosing a home based on your instincts alone! Doing research and reading around the subject will pay dividends when it comes to buying a home. We use technology to help us make data-driven decisions. You can do so too by using our Home Finder tool to identify undervalued homes in your search area.