Debunking social media mortgage myths

TikTok mortgage myths debunked

The hashtags #housedeposit, #renovationcosts, and #housebuyingprocess are some of the most popular, with some reaching viewing figures of up to 30 million. Yet, this can make it difficult for first-time buyers to separate the tall tales from the truth.

You need to save thousands for a deposit

Most people believe you need to save tens of thousands of pounds for a mortgage deposit, but there are now several schemes which allow you to buy with much less.

For example, no-deposit mortgage schemes require no deposit at all, as discussed online in one video that has reached almost 1,000 likes.

These schemes, such as the Track Record Mortgage from Skipton Building Society who were the first to launch the no deposit mortgage, targets renters who find the mortgage process daunting. To qualify, you must be a first-time buyer, over 21, have 12 months of on-time rent payments, and have a good credit score.

Barratt Homes also offer a deposit unlock scheme that enables first-time buyers to purchase a property with only a 5% deposit. There are also schemes that allow you to move into a new house whilst still only paying rent – this money then goes to your deposit – e.g. the Barratt Rent then Buy scheme.

Terry adds:

“There’s a handful of lenders including the likes of Halifax that will allow you to purchase your new home with as little as a 5% deposit. These mortgages are very popular with first time buyers.”

Your mortgage outcome is ultimately shaped by specific lending requirements

One TikTok video, already amassing nearly 200 likes and 5,000 views, highlights how the outcome of your mortgage is ultimately determined by strict lending factors like employment history, tax accounts, and having a large deposit sum to put towards a new home.

While these factors are significant and influence your borrowing capacity, most lenders are flexible, and take into account your personal circumstances. And as above, there are 95% and 100% mortgage schemes on offer too.

 

Terry explains:

“There are currently over 50 lenders and each of them have their own criteria and flexibility to cover most people’s personal and financial circumstances. Ultimately it is their job to ensure your new mortgage is affordable both now and in the future.

“Some examples of this are how they recognise different types of income like overtime or bonuses or how they consider any current commitments you may have like personal loans or credit. Some lenders will lend you more if you choose to take your new mortgage over a longer term (typically up to 35 years), as this makes the monthly payments more affordable.

“What’s more, when you buy a new property you may be able to get a ‘Green Mortgage’ which often comes with either slightly lower interest rates and or/cashback or a free valuation.”

Banks scrutinise every historical transaction you make and hold this against your mortgage application

In one video that has so far attracted over 3,000 views, a user discusses the significance of bank statements when applying for a mortgage. It’s the common belief that banks meticulously scrutinise all your historical financial statements, going through them with a fine-tooth comb and questioning your spending history.

Rather than delving into an exhaustive analysis of your financial history, lenders prefer to focus on only three key aspects: your income, regular expenses to assess affordability, and ensuring you are living within your means.

Typically, lenders only examine the previous two or three months of statements. If, within this limited timeframe, your financial metrics align with the lender’s criteria, you can become eligible to secure a mortgage.

This approach isn’t intrusive but it helps all parties, making the mortgage application process more accessible and straightforward for potential borrowers and safer for the lender.

“The lender’s job is to ensure your new mortgage is affordable both now and in the future. As much as lenders want to invest to help you secure a mortgage, they are also there to ensure the investment is the right opportunity for all parties. It’s also worth noting that not all lenders ask for bank statements, so it’s helpful to double check what your lender expects from your application.”

Lifetime ISAs are heavily taxed

A common misconception is that Lifetime ISAs are heavily taxed. However, Lifetime ISAs, designed for first-time buyers, allow tax-free money withdrawal that is exempt from income and capital gains taxes. However, one video with almost 2,000 likes addresses the fact that withdrawing funds for reasons other than buying a home or retirement before turning 60 can result in a 25% penalty.

Nevertheless, there are several benefits to saving in a LISA. You can receive a 25% bonus annually on up to £4,000, and you have the option to invest in stocks and shares instead of just saving your money.

“A Lifetime ISA (LISA) is an excellent tool for first time buyers between the ages of 18 and 40 who are looking to save for a deposit. Every year you save up to £4,000 into a LISA. The government will then top up your contributions by 25%. This means for every £4,000 you save; the government will add an extra £1,000. You can then use these savings, including the bonus paid by the government, as a deposit for your new home.

“Although the scheme states that when buying your new home with a Lifetime ISA, the cost of your home must not exceed £450,000.”

Which social media platforms do Gen Z prefer for mortgage guidance?

Findings from the study also reveal that platforms including YouTube, Reddit, and TikTok are now prominent choices for young first-time buyers in their quest for insightful guidance throughout the home-buying journey.

Social media site	Users seeking property and mortgage advice
YouTube	1 in 3
Instagram	1 in 6
Reddit	1 in 7
TikTok	1 in 9
Facebook	1 in 10

Leading the way, YouTube claims the top spot as the most preferred social media platform for seeking mortgage advice. Keyword data also reveals that searches for ‘UK mortgages explained’ and ‘Buy-to-let mortgages’ are the most searched-for videos on the platform in relation to the house-buying process, with average monthly searches reaching 500 and 300, respectively.

The most sought-after advice for first-time buyers trending on social media

Trending topic	% of users searching social media for related advice
Savings accounts	38%
House buying process	22%
Saving for a property deposit	18%
Renovation costs	10%
Affordable home ownership schemes	9%

Among the various stages of the homebuying journey, social media users show the greatest interest in seeking guidance on optimising savings accounts. Following closely behind is advice about the overall house-buying process, as well as valuable tips for saving towards a deposit.

Adrian MacDiarmid, Head of Mortgages at Barratt Developments, said:

“Social media and digital platforms are key sources of information, especially among the younger generation. For aspiring homeowners, it’s important to remain vigilant when it comes to mortgage misinformation online."

“While these platforms provide accessibility and ease to source some helpful guidance on securing a mortgage, always fact-check financial information with a credible source, such as suitably qualified and regulated mortgage advisers, who are available to answer any questions that prospective buyers may have when it comes to mortgages and the path to homeownership.”