Mortgage Myths Debunked UK — Common Misconceptions

Mortgage myths can cost you money. Here’s what’s actually true about UK mortgages.

Myth 1: You Need a 20% Deposit

The Myth

What People Think	Reality
“Can’t buy without 20%”	5% mortgages available
“10% minimum”	More options, not minimum
“Saving forever”	May not need to

Deposit Reality

Deposit Size	What It Means
5%	Possible (limited deals, higher rates)
10%	More choice, better rates
15%	Good rates available
20%+	Best rates, most choice
25%+	Rate improvements slow after this

Rate Difference Example (£200,000 Mortgage)

Deposit	LTV	Typical Rate	Monthly Payment
5% (£10,000)	95%	5.5%	£1,135
10% (£20,000)	90%	4.8%	£1,050
15% (£30,000)	85%	4.5%	£1,013
20% (£40,000)	80%	4.3%	£988

Help Available

Scheme	How It Helps
Guarantor mortgage	Family supports, less deposit
Lifetime ISA	25% bonus on savings
Help to Build	Self-build support
Shared Ownership	Buy a share

Myth 2: The Lowest Rate Is Always Best

The Myth

What People Think	Reality
“Just find lowest rate”	Total cost matters
“Rate comparison only”	Fees change the picture
“Cheaper monthly = better”	Not necessarily

What to Compare

Factor	Why It Matters
Interest rate	Main cost driver
Arrangement fee	Can be £0-2,000
Valuation fee	Often £0 with some deals
Legal fees	Free legal common
Cashback	Some deals offer this
Total cost	The real comparison

Example Comparison

Option	Rate	Fee	Total Over 2 Years
Deal A	4.5%	£999	£18,000 + £999 = £18,999
Deal B	4.7%	£0	£18,800
Better			Deal B (despite higher rate)

For Smaller Mortgages

Mortgage Size	Fee Impact
£100,000	£1,000 fee = 1% of mortgage
£300,000	£1,000 fee = 0.33% of mortgage
Smaller mortgage	Fees matter more

Myth 3: Fixing For Longer Is Always Safer

The Myth

What People Think	Reality
“5-year fix for security”	Depends on plans
“Longer = better”	May cost more, less flexibility
“Avoid rate rises”	Pay premium for certainty

Considerations

Factor	2-Year Fix	5-Year Fix
Rate	Usually lower	Usually higher
Flexibility	More frequent	Locked in longer
Life changes	Easier to adapt	ERCs if moving
Rate protection	Less	More

When Longer Might Not Suit

Situation	Risk
Might move in 3 years	Early repayment charges
Income may change	Terms locked
Want to overpay lots	Limits may apply

When Longer Makes Sense

Situation	Benefit
Plan to stay 5+ years	Rate certainty
Budgeting important	Fixed payments
Rates likely to rise	Protection

Myth 4: Staying Loyal to Your Lender Saves Money

The Myth

What People Think	Reality
“My bank will reward loyalty”	Usually not
“Switching is hassle”	Could cost thousands
“They’ll offer good rate”	Often not the best

What Actually Happens

After Fixed Rate Ends	Typical Rate
Standard Variable Rate (SVR)	6-8%+
New fixed rate (same lender)	May be OK
New deal (different lender)	Often best

Cost of Doing Nothing

On £200,000 Mortgage	Monthly Cost
2-year fix at 4.5%	£1,013
SVR at 7%	£1,330
Extra cost per month	£317
Extra per year	£3,804

The Fix

Action	When
Review 3-6 months before end	Every fixed rate
Compare whole market	Not just current lender
Use a broker	Free advice
Never stay on SVR	Without good reason

Myth 5: You Can’t Get a Mortgage If Self-Employed

The Myth

What People Think	Reality
“Banks don’t lend to self-employed”	They do
“Need years of accounts”	Usually 2 years
“Impossible to get”	Just different process

Self-Employed Requirements

Requirement	Typical
Trading history	2-3 years
Accounts/tax returns	SA302s, full accounts
Income assessed	Average or latest year
Credit history	Same as employed

Types of Self-Employment

Status	Assessment
Sole trader	Net profit
Ltd company director	Salary + dividends
Contractor	Day rate × days

Tips for Self-Employed

Action	Benefit
Use a specialist broker	Know which lenders suit
Keep records clean	Easy to prove income
File taxes promptly	Up-to-date SA302s
Don’t minimize profit too much	Affects borrowing

Myth 6: You Should Always Overpay Your Mortgage

The Myth

What People Think	Reality
“Pay off ASAP”	Sometimes better options
“Overpaying always wins”	Depends on rate
“No downside”	Check penalties first

When Overpaying Makes Sense

Situation	Why
Mortgage rate > savings rate	Effective ‘return’
No early repayment charge	Free to overpay
Emergency fund secure	Don’t drain savings
Pension contributions maxed	If tax relief used

When Something Else Might Be Better

Alternative	When Better
Emergency fund	If you don’t have 3-6 months
High-interest debt	Pay CC before mortgage
Pension contributions	Tax relief valuable
ISA	If mortgage rate very low

Overpayment Limits

Typical Limit	Details
10% per year	Of original balance
Over this	Early repayment charge
Check your deal	Limits vary

Myth 7: A Bigger Deposit Always Means Approval

The Myth

What People Think	Reality
“More deposit = approved”	Not that simple
“20% guarantees mortgage”	Affordability matters too
“Just need deposit”	Income, credit also assessed

What Lenders Actually Check

Factor	Weight
Affordability	High
Credit history	High
Deposit/LTV	High
Employment stability	Medium
Existing debts	Medium
Property type	Medium

You Could Have Big Deposit But Still Be Declined If

Reason	Issue
Income too low	Can’t afford payments
Poor credit	Risk concerns
Unstable employment	Income uncertainty
High existing debt	Affordability stretched
Unusual property	Lender won’t accept

Myth 8: Remortgaging Is Complicated and Expensive

The Myth

What People Think	Reality
“Too much hassle”	Broker does the work
“Expensive”	Often free deals
“Why bother”	Can save thousands

Typical Remortgage Costs

Cost	Amount
Valuation	Often £0 (free)
Legal fees	Often £0 (free legal)
Arrangement fee	£0-1,500
Total if fee-free	£0

What a Broker Does

Task	Who Does It
Find best deals	Broker
Compare options	Broker
Submit application	Broker
Chase lenders	Broker
Explain process	Broker
Cost to you	Usually £0

The Process

Step	Timescale
Speak to broker	Day 1
Apply	Days 1-7
Valuation	Weeks 1-2
Offer	Weeks 2-4
Legal work	Weeks 3-6
Completion	Week 6-8

Myth 9: You Should Just Get Treasury Prediction Mortgage

The Myth

What People Think	Reality
“Base rate will fall so go variable”	No one knows
“Fix because rates will rise”	Also uncertain
“Experts know”	Predictions often wrong

What To Actually Do

Approach	Reasoning
Choose based on circumstances	Not predictions
Can you afford rate rises?	If no, fix
Do you need certainty?	If yes, fix
Are you flexible?	Variable/tracker OK

Risk Assessment

Budget	Recommendation
Tight (little spare)	Fix for certainty
Comfortable	Could take variable
Any rate affordable	Tracker may work

Summary

Myths vs Reality

Myth	Truth
Need 20% deposit	5% minimum
Lowest rate is best	Total cost matters
Longer fix always better	Depends on plans
Loyalty pays	Usually doesn’t
Self-employed can’t get mortgage	Just different process
Always overpay	Check alternatives first
Big deposit = approval	Affordability matters
Remortgaging is complex	Broker makes it easy
Follow rate predictions	Base on your situation

Key Takeaways

Do	Don’t
Compare total costs	Just look at rate
Review before deal ends	Stay on SVR
Use a broker	Go direct without comparing
Consider your circumstances	Follow the crowd
Check overpayment rules	Overpay and get charged