Buying your first home is almost certainly going to be one of the biggest expenses you’ll ever face. It’s a big step to take, and you’ll want to find out as much about the process as you possibly can.
But your careful research can throw up a lot of myths along with the facts. So we’ve put together this handy list of some of the most common myths you’re likely to come across. We can’t actually be there when you complete on your first home, but we can certainly help to shed some light along your purchasing journey.
With that in mind, we’ve prepared a list of ten popular myths connected to buying your first home, as follows.
1. I can’t afford to pay a mortgage as it’ll be more expensive than renting.
Many first-time buyers are surprised to discover that their mortgage costs are less than they were previously paying in rent. But even where that’s not the case, when you take out a mortgage you’re also paying into a long-term investment. Whereas once your rent money is paid, you have nothing left to show for it. Even where finances are a major stumbling block, there could still be opportunities to buy. Look out for shared-ownership schemes, in which you buy a proportion of your property, while renting the remainder. As your circumstances change, you can buy a bigger share in the property, giving you a foothold on the property ladder.
2. I won’t be able to get a mortgage without a perfect credit rating
It’s a fact that the majority of mortgage lenders are on the lookout for good credit ratings. But unless you have some major issues with your credit score, you’ll almost certainly be able to find a mortgage for your circumstances. It’s advisable to check out your credit rating before you start searching for a suitable mortgage. If there are any problems or inaccuracies, you can sort them out before applying, which will give you a much better outcome. And bear in mind that mortgages offered to anyone with a poor credit rating will cost more, due to the increased level of risk to the provider.
3. I’ll have to put down a 20% deposit to take out a mortgage
You’ll certainly get a bigger choice of mortgage options if you can manage to put down a substantial deposit on your new home. But many mortgage lenders consider a deposit of just 5% of the purchase pride to be perfectly acceptable. And it’s still possible, albeit rare, to be able to source a 100% mortgage in some circumstances. You’ll almost certainly need to have a parent acting as guarantor though. Be aware that taking out a 100% mortgage puts you at risk of ending up in negative equity if house prices fall. That would result in you owing more than the value of the property.
4. I can only get a mortgage through my bank
Many first-time buyers approach their bank to provide them with a mortgage. But you’re certainly not obliged to do so. There’s a huge number of mortgage providers and options available, so be sure to check them all out before coming to a decision.
5. It’s better to take out a longer-term mortgage
The longer the term of your mortgage, the less you’ll need to repay every month. But this will result in a higher total than paying more per month across a shorter term. You need to assess your financial circumstances before deciding which option suits you best.
6. The only costs when buying a home are the deposit and mortgage repayments
This is a fairly common misconception that can cause chaos with financial plans. There are plenty of additional costs that need to be taken into consideration, including those associated with setting up the mortgage in the first place. You should be sure to factor in the cost of a survey, as well as solicitor’s fees. Depending on the value of your new home, you might have to pay stamp duty too. And it will cost more money to take care of moving-in expenses as well as building and contents insurance.
7. Lower interest rates mean cheaper mortgages
There are lots of different types of mortgages available, so lower interest rates don’t always result in the cheapest deals overall. You’ll need to decide whether to choose a fixed-rate mortgage, for example, or a tracker rate. A fixed-rate mortgage lets you plan your finances well in advance, so there are no unpleasant surprises. But a sudden drop in interest rates won’t pass on any benefits to you, as you’ll still pay the same rate that you signed up for.
Choose a tracker mortgage, and when interest rates fall, so do your monthly repayments. But a steep rise in interest rates would also be passed on, so you need to be aware that your repayments could increase over the term of your mortgage.
8. Taking out a mortgage won’t leave anything over for furnishing my new home
Some mortgage companies are well aware of the initial expenses involved in buying your first home and offer ways to help. A Cashback mortgage pays out a lump sum when you buy your new home. This money can be used to decorate and furnish your property, making it an attractive offer. But remember that the cost of the cashback will be added to your overall mortgage, so it will inevitably cost you more over the long term.
9. I don’t need to arrange a mortgage until I’ve found my dream home
There’s no obligation to source a mortgage before you start house hunting, but it’s definitely advisable. Being able to act fast when you find a place you love can help to ensure the sale goes through smoothly and quickly. But if you find your perfect property and then start hunting for a mortgage, you could lose your opportunity to another buyer while you’re sorting out the fine print.
10. I’m not in full-time employment so I don’t qualify for a mortgage
It used to be the case that mortgage lenders would only lend to someone in full-time employment. But with flexible hours, self-employment and remote working all on the rise, that’s no longer the case. You’ll need to provide proof of your income though, as well as evidence of regular income.