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Some Myths Surrounding Mortgages and Buying a Property

It was if buying a property was not difficult enough, finding the right house in the right location, negotiating the price, making sure the property is sound and in good shape, getting approved for a mortgage, which means a deposit has to be saved up, and also making sure your credit is good enough to qualify for the mortgage loan.

As if this all was not enough to deal with, you also have to side step some landmines and myths that surround the mortgage and buying a house process.

Yes, there are some myths that people believe are true when it comes to getting a mortgage and buying a property.

So we are here to dispel some of those myths or not exactly right fallacies that some may believe.

I Have to Have Life Insurance

One myth that surrounds buying a property and getting a mortgage loan is that you have to have life insurance; either to have the mortgage approved, or to buy a property.

That is simply not true, a myth.

When you buy a property and take out a mortgage, one condition of the mortgage loan may very will be building insurance. This is insurance to protect the house or property itself, it may also protect any out buildings, fencing, or other aspects of the property.

This insurance is in place so that if anything happens to the property, it can be repaired, or possibly replaced, and the lender and you the owner are not out of pocket or facing a loss.

Most homeowners, and also tenants, will also take out contents insurance, to protect the contents inside the property.

This is a wise move financially as if a property were damaged or destroyed, the building insurance only covers the building, not the contents. Many of us have thousands of pounds invested in our possessions/contents inside the property.

Life insurance is insurance on a person’s life; it is said life insurance is not for the person insured, but for the living they leave behind.

The reason there is a myth about life insurance and taking out a mortgage, and why some mortgage lenders even state the borrower must have life insurance, which is NOT true, is so that if the borrower dies, the loan can be paid off by the proceeds of the life insurance.

If the borrower has a joint mortgage loan with their spouse or partner, life insurance on both does make sense. That way should anything happen to one of them, the other can pay off the mortgage and continue ot live in the property.

But life insurance is not necessary to get approved for the mortgage loan. It is NOT a legal requirement.

I Need a Large Deposit to Buy a Property

It is true that the larger the deposit you have to buy a property, the better your chances are of getting approved for a mortgage.

That is because the large deposit offsets how much you need to borrow to buy the property, and a lower loan amount reduces the lender’s exposure on the loan.

Those borrowers with large deposits tend to have a lower default rate on their loans.

And while a large deposit is good to have, there are ways to buy a property with little or no deposit.

Parents wishing to help their children get on the property ladder can gift equity in their property, or use savings they may have to pledge towards the mortgage.

Both ways to reduce the amount of deposit a new, young, borrower may need.

In addition, there are lenders willing to offer mortgage to borrowers with a low deposit, in many instances if they have a good credit score.

I Need a High Credit Score to Get Approved For a Mortgage

This not entirely a myth, but a myth that can be swayed some.

Most mortgage lenders do have a set figure or credit score required in order to get approved for a mortgage. Many have different levels for credit scores, so one high credit score may receive a lower interest rate that someone with a slightly lower credit score.

However, it is possible to get approved for a mortgage with a low credit score, and even if you have had bad credit in the past. This is by having a guarantor for the mortgage loan.

By having a good friend or family member sign as guarantor for the loan, the loan can be approved based on two factors:

* Affordability

* The fact there is a guarantor

Credit scoring is not used, your credit file may be reviewed, but to qualify you do not need a high credit score.

Obviously if someone is currently bankrupt, or has outstanding judgments which could jeopardy the property as other lenders the borrower owes money to may look to place charging orders against the property, these can cause a lender to not grant a mortgage, even with a guarantor.

However, having a guarantor in most instances, and being able to afford the property, can overcome any low credit score or credit issues.

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<strong>What is Our Criteria For Applying?</strong> 
Every lender on our website has their own specific criteria by the basics are mentioned below and you must have a guarantor to be eligible. Simply select the lender of your choice and you will be taken directly to their website where you can apply. You will be required to submit your details including:<li style=”text-align: center;” data-mce-style=”text-align: center;”>Name (must be over 18 as the borrow, 21 or 25 as the guarantor)</li><br /><li style=”text-align: center;” data-mce-style=”text-align: center;”>Residence (your chances will improve if your guarantor is a homeowner)</li><br /><li style=”text-align: center;” data-mce-style=”text-align: center;”>Employment status (must be employed or on a pension)</li><br /><li style=”text-align: center;” data-mce-style=”text-align: center;”>Income (earning at least £600 per month and able to make repayments)</li><br /><li style=”text-align: center;” data-mce-style=”text-align: center;”>Monthly expenses (not have too many loans open or in major debt)</li>
 
You will then be asked to include the details of your guarantor and as mentioned above, this is usually someone who you know and trust and wants to help you with your personal finances. Ideally, a guarantor with good credit will maximise your chances of being approved based on the idea of ‘if someone with good credit trusts you, well we can too.'<strong>How Much Can I Borrow From Guarantor Loans?</strong>Guarantor Loans gives applicants the chance to borrow £500 to £15,000 depending on the lender. Some lenders we feature like Buddy Loans only have a maximum loan value of £7,500 and TFS Loans is the only lender that stretches up to £15,000.Factors that can influence the amount you can borrow revolve around having a good guarantor. One that is a homeowner, with solid employment, income and good credit rating will maximise your chances of borrowing the largest drawdown possible.The lenders featured on Guarantor Loans see a homeowner as someone who has already gone through the rigorous process of credit checking and affordability and if they can afford a house, they should be able to act as a guarantor for you.By comparison, having a guarantor that is not a homeowner offers slightly less security and means that amount you can borrow is slightly less too.Higher amounts may be available to those who already have a better than average credit rating, are homeowners themselves and a repeat customer with the lender who has already paid their loan on time. To apply directly with your lender of choice see <a href=”https://www.paydaybadcredit.co.uk/direct-lender/” data-mce-href=”https://www.paydaybadcredit.co.uk/direct-lender/”>direct lenders</a>.<strong>What Does The Guarantor Have To Do?</strong>Upon completing an application, the lender will typically send you a <a href=”https://www.handbook.fca.org.uk/handbook/CONC/4/2.html” data-mce-href=”https://www.handbook.fca.org.uk/handbook/CONC/4/2.html”>pre-contract loan agreement</a> and SECCI (Standard European Consumer Credit Information form) which will highlight the terms of your loan. You and your guarantor will be required to review the terms of the loan, including the loan drawdown, fees, repayment dates and responsibilities – and this can be signed via an online verification process using your email and mobile phone.The lender will usually carry out an individual phone call with you and your guarantor to ensure that you both understand the responsibilities and what is required of you – notably that if you cannot make repayment, your guarantor will be required to pay on your behalf. Further to some additional credit and affordability checks, funds can typically be transferred within 24 to 48 hours (or sometimes on the same day).<strong>Are Guarantor Loans Available For Bad Credit Customers?</strong>Yes, even if you have a history of adverse credit, <a href=”https://www.gov.uk/county-court-judgments-ccj-for-debt” data-mce-href=”https://www.gov.uk/county-court-judgments-ccj-for-debt”>CCJs</a>, bankruptcy or IVAs several years ago, you can still be eligible. The idea is that you are using your guarantor and their financial history to ‘back you up’ and give your loan extra security. However, it is noted that your guarantor should have a good credit score and consent to co-signing your loan agreement.<strong>How Soon Can I Receive Funds?</strong>Guarantor Loans works with lenders that can facilitate funds within 24 to 48 hours of approval, or sometimes on the same day.When your funds are successfully transferred, most lenders working with Guarantor Loans will send the full amount to the guarantor’s debit account first. This is a standard security measure carried out by lenders to ensure that the funds are going to the right person and confirms the involvement of the guarantor. The guarantor usually has a ‘two week cooling off period’ where they can decide to pass on the money to the main borrower or they can change their mind and return the funds with no extra charges.