Understanding mortgages can be daunting, especially with so many myths circulating. To help clear things up, we spoke with James McGregor from InTouch Financial, our trusted financial advisors, to address some of the most common mortgage misconceptions.
Myth: You need a 10% Deposit to Secure a Mortgage
Banks Homes: James, thanks for joining us today. Let’s dive right in—one of the most persistent myths is that you need a 10% deposit to secure a mortgage. What’s the reality?
James: Glad to be here! This is one of the biggest myths out there. The truth is you don’t always need a 10% deposit. Many lenders offer 95% loan-to-value (LTV) mortgages, which means you only need a 5% deposit. For instance, if you’re buying a property for £200,000, a 5% deposit would be just £10,000.
Of course, having a larger deposit can help you access better interest rates, but for first-time buyers or those eager to get on the property ladder, a smaller deposit is often sufficient.
Myth: Self-employed Individuals Need Three Years Accounts to Get a Mortgage
Banks Homes: That’s encouraging for many buyers! Another myth we have heard is that self-employed individuals need three years of accounts to get a mortgage. Is that true?
James: Not necessarily, while some lenders prefer to see three years of accounts, many are happy with just one year of accounts or tax returns from self-employed applicants. What lenders are really looking for is evidence of stable or growing income. This can come from your latest accounts, an HMRC tax calculation, or even projected income in some cases. It’s all about presenting a strong case, and that’s where working with a broker can be invaluable.
Myth: Non-UK Nationals Need Permanent Residency Before Applying for a Mortgage
Banks Homes: That’s great to know. What about non-UK nationals? Do they need permanent residency before applying for a mortgage?
James: Not at all! There are lenders out there who will work with non-UK nationals even if they don’t have permanent residency. The key is meeting certain criteria. For example, you may need to show you’ve lived in the UK for at least a year, have a valid visa, and demonstrate stable employment and income. Building a good credit history in the UK can also be a big help.
Myth: You Need 3 Months Payslips Before Applying for a Mortgage
Banks Homes: And what about people who have just started a new job? There is a belief that they need three months of payslips before applying. Is this a deal-breaker?
James: Definitely not a deal-breaker. Many lenders are willing to accept proof of employment through your employment contract instead of waiting for three months of payslips. This flexibility can be helpful for those starting a new role or transitioning careers. Lenders will also consider other factors like the industry you are in, the stability of your job, and your projected income.
Banks Homes: Thanks for clearing up these myths, James!
James: My pleasure!
When it comes to mortgages, knowledge is power. By understanding your options and debunking common myths, you can approach the process with confidence. For personalised guidance, do not hesitate to reach out to a trusted advisor like InTouch Financial.
