Myth 01 Young people can't get on the ladder at all
Government First Homes Scheme
The truth:95% mortgages are available from a number of lenders, and the Government has recently announced an extension to the Government Mortgage Guarantee Scheme which supports lenders with high loan to value mortgages. The important thing with this level of mortgage is to take advice as early as possible in the process to fully understand costs and whether you qualify. The mortgage market is constantly looking at new schemes and products so check regularly for updated news.
The truth: Lots of people believe that their existing bank is the one and only place to go when it’s time to think about a mortgage. That might be because our own banks will have sent lots of emails and letters advertising what they can offer, alongside their preferential rates.
But it does make sound sense to look around a little. Not only might other banks be able to match or better those offers, but there are plenty of non-banking organisations that can provide you with a mortgage.
This is not true and any monthly outgoings will be considered in your application to assess mortgage affordability. This includes grocery bills, utility bills, debt repayments, car finance, car leasing and student loans.
All of these general expenditures will help the lender to assess your disposable income. Hire purchases or financed purchases are usually annualised and the final amount taken off your annual income. Apart from this, lenders will also conduct an assessment of your finances in case of a change in circumstances - assuring them, and you, that mortgage repayments would always be made.
It’s certainly true that you may struggle to get a mortgage with a bad credit history, but by no means will your credit score need to be perfect.
Getting a mortgage can be difficult if you’ve got a bad credit history, but it’s not impossible. Some mortgage lenders offer bad credit mortgages specifically designed for people in this situation. However, there is a difference between a bad credit history (due to a missed loan payment or a County Court Judgement, for example) and no credit history at all, which might be the case if you’ve never taken out credit or a loan.
This is a mistake for two reasons. Firstly, by talking with an advisor beforehand, you’ll be able to get a realistic picture of what you can afford to buy, giving you your budget.
Secondly, you can get yourself a mortgage Agreement in Principle (AIP). Though these are time-limited, they act as a ‘provisional’ agreement between you and a lender, and mean things can move much more quickly should you have an offer accepted on a house you love.
In many cases and areas, what you repay on your mortgage each month is very similar to local rental values, of course everyone’s circumstances are slightly different, but it’s always best to make an informed decision as to what is right for you. It’s also important to consider that with your mortgage repayments, you’re adding to the equity you own in the property each time, whereas you won’t be building any equity as a renter.
It is true that by purchasing your own home, you’re starting to establish security for your future.
The truth:It’s certainly right to consider the interest rate, as this can affect how much your mortgage actually ‘costs’. But that’s not to say you should assume that the lowest interest rate means the cheapest mortgage.
The interest rate you’ll pay is just one of several factors influencing the overall cost of a mortgage. You’ll also need to look at:
It’s a common misconception that lenders see anyone not in full-time work as a risk. With the rise in freelance, flexible and contract working in the UK, some lenders today may take a much more individual approach when it comes to assessing people’s employment situation. There’s every chance they’ll lend to you provided your income is stable and sufficient.
The truth: Homebuyers who are self-employed actually do have access to the same mortgages as somebody who is in employment. However, where employed buyers have access to payslips, those self-employed do not. This means that the process for proving that you can make repayments on your mortgage could be more difficult. Self-employed people will need to produce a tax assessment form, which is called an SA302, or accounts for their earnings to be taken into account by a lender.