Top 7 Mortgage Myths Brokers Often Hear

This month, Seico Mortgages’ expert insights debunk common myths that cause concern to homeowners…

“Will I get a better or worse interest rate if I change the term of my mortgage?”

No – the term of your mortgage has no bearing on the interest rate you’re offered.

Interest rates are usually determined by the size of your deposit or equity: the larger the deposit, the lower the interest rate.

Having a longer mortgage term (30–40 years) gives you the advantage of lower monthly payments; however, it also means you’re repaying the capital more slowly, resulting in more interest paid overall. It’s important to weigh up your preferences and long-term financial goals.

“But I already have a Decision in Principle with a lower interest rate.”

A Decision in Principle (DIP) does not secure a mortgage rate. In most cases, you cannot actually secure an interest rate until you formally apply for the mortgage.

Interest rates fluctuate depending on the market, so any rates you see before applying should be treated as indicative. The main purpose of a DIP is to demonstrate how much you can borrow and confirm that you’ve passed a lender’s credit check – which is particularly useful when making an offer through an estate agent.

“If I get declined for a mortgage, will it damage my credit score and stop me applying elsewhere?”

No. There are two types of credit checks: a soft credit check and a hard credit check.

Most DIPs use a soft credit check, which does not leave a mark on your credit file. Full mortgage applications, however, use a hard credit check. While it’s true that a hard search can impact your credit score, in reality, the effect is usually minimal.

Unless your credit score is already very fragile, most people can apply more than once without seeing any significant damage to their credit rating.

“A fixed rate is better than a variable rate.”

One option isn’t inherently ‘better’ – it depends entirely on personal preference.

A fixed rate may suit someone who wants the certainty that their payments won’t change. A variable rate may suit someone seeking greater flexibility to exit their mortgage more easily.

Variable rates are often preferred by people planning to sell their property, as they typically allow for early repayment without high penalties.

“But my business turnover is higher – why can’t I borrow more?”

Lenders assess your borrowing capacity based on your profit, not your turnover.

Even if your turnover has grown, rising expenses may reduce your profit – and therefore the amount you can borrow. Conversely, if expenses have fallen, your profit (and borrowing potential) may increase.

It’s important to note that changing your declared profit can have tax implications, so always consult your accountant before finalising your tax return or company accounts.

“I can’t get a mortgage because I’m on maternity leave.”

This is a common myth – and it’s completely untrue if you’re employed.

Lenders must not discriminate against women on maternity leave. While your payslips may show a reduced income during this time, lenders will usually accept your full contracted salary, provided you can confirm your return-to-work date (often via a letter from your employer).

Please note: if you’re self-employed, this doesn’t apply in the same way – your income is based on business profits, which may have been impacted during maternity leave.

“But I have 999 on Experian!”

While a high credit score on Experian (or other credit agencies) is a good sign, it doesn’t automatically mean you’ll pass a lender’s assessment.

Lenders look at your overall credit profile, not just your score. This includes factors like your profession, age, deposit size, loan amount, and more.

To be certain, it’s always advisable to obtain a Decision in Principle to confirm that you meet a lender’s internal criteria.

For independent advice based on your individual circumstances, call us for an initial chat:

01273 778888

www.seicogroup.com