Mortgages & Property

Mortgage Myths Debunked UK — Common Misconceptions

Common mortgage myths UK debunked. What's true, what's not, and how mortgages really work. Avoid costly mistakes from mortgage misinformation.

By PocketWise · · 6 min read

Mortgage information is general guidance only. Mortgages are regulated by the FCA. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Consult an FCA-regulated mortgage adviser before making decisions.

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

Your home may be repossessed if you do not keep up repayments on your mortgage. PocketWise provides information and guidance — we do not offer financial advice. Seek independent mortgage advice before making decisions about borrowing.

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Sources

  1. FCA — Mortgages
  2. MoneyHelper — Buying a home