MORTGAGE ADVICE THAT YOU SHOULD THINK TWICE ABOUT FOLLOWING
THEY COULD BE “GOOD FOR ONE PERSON AND BAD FOR ANOTHER”
Social media has given a platform for a lot of un-qualified people claiming or making it appear that they are ‘experts’ on certain subjects, including mortgages. People can watch them anytime and anywhere, so the potential to reach a lot of potential homebuyers who know very little or nothing about mortgages & property is enormous.
It might seem like good advice, but people must be careful in following these generic financial and mortgage tips.
“When it comes to health, give me all the blanket advice you want, don’t smoke, don’t drink, eat healthy, do some exercise, great advice!”. When it comes to finance, its simply too nauced to apply a single piece of advice to everyone. Other than some high level ‘pay your bills on time’ guff, the same piece of advice could be good for one person and bad for another.
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Social media and good old fashioned media seem to keep giving us tips and hacks on how best to prepare for homeownership. While the ‘advice’ ultimately derives from a good place, I have found myself cringing on more than one occasion. Some of the suggestions and ‘advice’ being given online and in the media are simply incorrect or far too vague.
A few of the common pieces of advice that people should think twice about before making any rash decisions.
Pay off your debts. This is one particular piece of advice which keeps rearing its ugly head over and over again. In practice, the vast majority of lenders calculate the maximum mortgage amount you can afford to borrow based on a surplus at the end of the month, its that surplus that matters, not the unsecured debt.
Recently, I have an example of a first time buyer with a 25% deposit earning £30,000 per year who could borrow £148,500 on a five year fixed rate over 35 years. If the same person has a personal loan with a monthly payment of 195, the chosen lender will still provide a mortgage amount of £148,500 available to the buyer, depending on their cashflow, paying the loan off could be very bad advice.
Take a variable rate product such as a discounted rate or a Bank of England tracker because rates are going to be coming down. This is
where the importance of mortgage/financial advisers clearly defining their role.
As an adviser, my job is to help people make the correct informed decisions, this is based on what I have learned about my clients after a detailed fact find has been completed, studied along with all the necessary documentation needed such as payslips for employed, business accounts for self employed, bank statements etc, variable rate mortgage products are suitable for some people and unsuitable for others, its entirely down to the individual circumstances.
No adviser should be basing their advice entirely on their personal opinions, and general statements like these are dangerous and should not be made.
Take out a credit card to increase your credit score, there are very few scenarios where this is necessary.
I have seen this posted many times in various first time buyer guidelines online. Advising anyone to take out unsecured credit for the sake of enhanc- ing their creditworthiness is something that should only be done after the adviser has de- termined it to be absolutely necessary.
In practice, at Moneywatch Finance, we typically only find this to be necessary for individuals who have moved to the UK relatively recently. Most first time buyers that have lived in the UK since birth have a mature enough credit profile to qualify for a mortgage with most lenders. By the time we reach our mid 20s, chances are we have taken the odd phone contract or have been given an overdraft by our bank.
Lenders do not expect applicants to have a mature and detailed credit past if it is their first
mortgage.
Their systems have rules engines in place to account for this. It is very important to seek qualified advice from a mortgage broker/ adviser before you apply for a credit builder card simply because you read a thing online.
It is understandably that people seek mortgage advice & guidance on what to do, the general public would be best served by facts. Any good mortgage broker/adviser will tell you, there is no such thing as a stupid question, we’re here to help and offer tailored advise based on you as an individual, because there is no one size fits all when it comes to the world of mortgages.
For further information please contact Peter Hunt on: 0121 503 0961
www.moneywatchfinance.com
Peter is one of the panel experts for the Grand Designs live TV show and has been recognised in the Times Vouched For guide to the UK’s top rated financial advisers every year since 2019
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THE MIDLANDS PROPERT Y GUIDE MONE YWATCH F INANCE
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