More than half of first-time buyers (57%) believe they’d be able to borrow up to 10 times’ their income when they take out a mortgage, according to new research.
Santander looked at some of the top misconceptions first-time buyers have when buying a property, and found that many are confused about mortgage rules, or don’t understand how the conveyancing process works.
Three quarters of those questioned (76%) mistakenly believed that LTV stands for Long Term Value and relates to house prices rising over time, whilst three in five think ‘exchange’ is when you hand over the keys on moving day.
Seven out of 10 first-time buyers (71%) said they thought the seller was obliged to tell them about any problems with the property during a viewing, and 56% said that they believed buildings insurance is optional when buying a property with a mortgage.
Mortgage myths busted
Here are some of the main mortgage facts first-time buyers need to get to grips with before purchasing a property.
• LTV stands for loan-to-value and is a percentage figure used to express the size of your mortgage in relation to the value of the property you are buying. Lenders typically offer different mortgage deals depending on the LTV, so the larger your deposit and the lower the LTV, the better your mortgage rate will be.
• The most you can borrow when taking out a mortgage is usually capped at four and a half times your income if you’re buying on your own, or around three times’ your joint income if you’re buying with someone else.
• Exchange happens when contracts agreeing to the property purchase are swapped with the seller, at which point you become legally committed to buying the property. You only get the keys to your new home upon completion, when funds are handed over to the seller.
• Sellers need to disclose any issues that may legitimately affect your decision to buy their home on the Property Information Form, which is passed to your solicitor during the conveyancing process. They don’t need to tell you about any problems during viewings. It’s important to arrange your own property survey to check whether there are any potential or actual defects with the home you’re buying. Find out more about the different types of survey.
• Building insurance is compulsory when purchasing a property with a mortgage. Your lender will want to see proof that you’ve arranged cover prior to completion.
Find out more about the property-buying process
If you’re foxed by all the jargon involved in buying a property for the first time, we’ve got plenty of resources to help.
For example, our comprehensive guide on how to get on the property ladder tells you everything you need to know about buying your first home. If you’re struggling to save a deposit, your can learn about Government schemes for first-time buyers which may help you boost the amount you put away each month.
You can see all our guides for first-time buyers here.
Top first-time buyer misconceptions revealed