Mortgages are incredibly complex parts of life that many of us in the UK will have to think about at some point.
There are so many important factors that you need to consider before making a start on your mortgage payments, meaning that there are plenty of interesting facts that you may need to know!
In this blog post, we have devised a list of our top 10 facts about mortgages, divided into 5 facts we believe you will find useful, and 5 facts that you may find interesting.
5 Useful Facts
If you are currently looking for a mortgage, there are several pieces of information that are important to know before you get started. If you still have any questions after reading this, please do not hesitate to get in touch with our team for support.
You Won’t Need a Massive Deposit
While many people think they need a huge deposit to secure a mortgage, that’s not always the case. In the UK, some mortgage lenders offer products that allow you to buy a home with as little as a 5% deposit.
These lower-deposit mortgages often come with higher interest rates, but they make homeownership accessible to more people, especially first-time buyers.
Low Mortgage Rates Don’t Always Provide the Best Value
It’s easy to get lured in by low headline interest rates, but these don’t necessarily mean you’re getting the best deal.
Some low-rate mortgages come with high fees or restrictive terms that could end up costing more in the long run. It’s important to compare the overall costs and consider factors like arrangement fees, early repayment charges, and flexibility.
Your Mortgage Rate May not be Consistent
If you opt for a variable or tracker mortgage, your interest rate could change over time. This means your monthly payments might increase or decrease depending on the Bank of England’s base rate or your lender’s standard variable rate.
Even fixed-rate mortgages only provide rate stability for a set period, usually 2 to 10 years, after which you may be moved to a variable rate unless you remortgage.
Credit Rating Doesn’t Necessarily Affect Your Mortgage Rate
A good credit score can help you secure better mortgage deals, but it’s not the only factor lenders consider. Some lenders specialise in offering mortgages to people with less-than-perfect credit.
Your income, deposit size and overall financial situation play a significant role as well. Even with a lower credit score, there are options available, though they might come with higher interest rates.
Mortgage Costs Can Be Higher Than the Value of Your Home
In certain situations, especially during economic downturns, your home’s value could fall below the outstanding balance on your mortgage.
This is known as “negative equity.” While it’s rare, it can happen if house prices drop sharply, leaving you owing more than the home is worth. This makes it harder to sell or remortgage without taking a loss.
5 Fun Facts
While mortgages are incredibly complicated things, there are plenty of interesting facts surrounding them that are more than just useful pieces of information. Read on to learn about our top fun facts about mortgages.
The Word Mortgage Comes From Old French
The word “mortgage” is derived from the Old French term “mort gaige,” which translates to “dead pledge.” It reflects the idea that the pledge (the mortgage) “dies” when either the loan is paid off or the property is repossessed.
Most First-Time Home Buyers Try To Put Down as Large a Deposit as Possible
In the UK, people are given flexibility over how large of a deposit they want to put forward on their house, this typically ranges from around 5% – 20% of the total house price.
For first-time buyers, it is incredibly common to put down as large a deposit as they can. On average, first-time buyers will place roughly 15% as their deposit on a 3-bedroom house.
Mortgages are the Most Common Method of Home Buying
As of 2021-2022, 29.5% of households in the UK were homeowners with a mortgage. This translates to approximately 4.6 million households, given that there were 15.6 million owner-occupied households in total during this period.
Mortgages are Typically the Highest Contributor to Personal Debt
Mortgages tend to be the largest debt most people will ever have. In fact, UK households have a combined mortgage debt of over £1.6 trillion. This is why so many people opt for mortgage brokers to make sure their finances are in check.
However, since a mortgage is secured against property, it’s considered a safer form of debt compared to unsecured loans or credit card debt.
Dennis Hope’s Lunar Real Estate
An entrepreneur named Dennis Hope famously claimed ownership of the Moon and has been selling plots of lunar land for decades. He even offers “lunar mortgages,” though they are, of course, not legally recognised. This is simply a fun example of the lengths people will go to in their real estate ventures!
