Buying a first home can feel overwhelming, particularly when it comes to understanding mortgage options and eligibility criteria. Recent research by the HomeOwners Alliances revealed that a large proportion of first-time buyers are being put off applying for mortgages based on misunderstandings about requirements and eligibility.
We review some of the key findings and debunk some of the myths:
Myth 1: 62% think you need at least a 10% deposit to buy a home
While some mortgage products require a 10% deposit, there are many mortgage deals available with a 5% deposit. The government introduced a Mortgage Guarantee Scheme in 2021 to encourage lenders to offer 95% Loan to Value mortgages, with the government taking on the additional risk.
Myth 2: 65% believe having bad credit means you cannot get a mortgage
Having bad credit can make it more difficult to secure a mortgage but having a poor credit score does not necessarily mean applicants will be declined for a mortgage. Lenders look at more factors than credit score and there are lenders who specialise in mortgages for applicants with adverse credit.
Myth 3: 47% believe the lowest interest rate automatically means the cheapest mortgage overall
Almost half of the first-time buyers surveyed believed that the lowest interest rate deals will always be the cheapest. Interest rates are an important part of the calculations but additional costs such as mortgage arrangement fees can mean that the overall mortgage cost is higher. Therefore, it is important to compare deals based on the overall cost.
