Common mortgage misunderstandings and myths busted

Around two-thirds of people surveyed said no one had taught them about mortgages, Experian said.

Someone looking in an estate agent's window (PA Archive)

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.

It's important to understand what properties are in your price range and the types of mortgages available to you

James Jones, Experian

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.