Common mortgage misunderstandings and myths busted

Around two-thirds of people aged in their 20s and 30s hope to buy a new home in the next five years, according to a survey.

Some 66% of people in their 30s and 67% in their 20s are considering buying a property in the next five years, compared to 38% of adults across all age groups, consumer credit reporting agency Experian found.

But nearly half (49%) of people in their 30s and 42% in their 20s are worried they will never appear “mortgage-ready” to providers.

Three in 10 (27%) people said they were unsure of how to prepare to get a mortgage.

Experian also found some misunderstandings in the mortgage application process.

Nearly two-thirds (62%) of those surveyed believed it was either not possible to secure a mortgage when in debt, or were unsure whether they could do so.

But Experian said that making regular, on-time payments to reduce any existing debt can potentially increase someone’s credit score and help them appear more mortgage-ready to lenders.

It said people should only get a mortgage if they can afford the monthly repayments and existing debts will be factored into mortgage lenders’ affordability assessments.

More than half (54%) of people surveyed thought they should only apply for a mortgage once they had found their desired property, or were unsure about this.

But Experian said people can secure a decision in principle with a lender before formally attempting to secure the mortgage loan, giving them an accurate idea of what they can borrow and their overall budget.

And nearly a quarter (24%) of people wrongly thought they could only get a mortgage with their existing bank, or were unsure about this.

In reality, people are free to shop around.

James Jones, head of consumer affairs at Experian, said: “It’s important to understand what properties are in your price range and the types of mortgages available to you.”

He added: “Taking the time to improve your credit score when searching for your perfect home will help you access the best mortgage rates and, as a result, have more disposable income every month to spend on other things.”

Around two-thirds (67%) of people surveyed said no one had taught them about mortgages.

Some 2,000 people were surveyed across the UK in June.