Stamp duty: it's something we hear about a lot in the property world but, according to a new study, a lot of people are still not quite sure what it is.
Almost a fifth of prospective purchasers surveyed by Online Mortgage Advisor said they thought stamp duty refers to the cost of posting necessary paperwork during a property transaction.
It is, of course, the tax paid on the purchase of a property over a certain price.
Stamp duty has been at the centre of two high profile reforms over the past 18 months so it is slightly surprising that so many people thought it relates to postage.
Back in December 2014, it was announced that the old 'slab' stamp duty tax would be replaced with a more 'progressive' system similar to how income tax is charged.
And just a year later, stamp duty once again made waves as the Chancellor announced his proposals for a 3% stamp duty surcharge on purchases of buy-to-let properties and second homes.
Online Mortgage Advisor's study also found that 65% of the people it surveyed who are currently seeking a mortgage feel 'fairly confident' about their knowledge of mortgages.
The 2,000+ participants – all of whom are planning to get a mortgage in the next year – were then provided with a list of statements about mortgages.
Some of the statements were true, some were false and the participants were asked to select the statements they thought were true in order to determine the most common mortgage misconceptions.
Here are the top three:
“You must have been in a job for at least six months to be eligible for a mortgage”
Some 39% of the respondents thought this statement was true – it's not. There is not a minimum term you need to have been in a job to be eligible for a mortgage.
However, most lenders will naturally look upon job security favourably. According to moneysupermarket, it's best to have been in your existing job for at least three to six months before applying for a mortgage.
“Your credit score is the primary thing lenders care about when it comes to mortgages”
Some 36% of those taking part in the study thought this statement was categorically true. Despite not being the one and only thing lenders are interested in, your credit score is still vitally important. Most borrowers are encouraged to check their credit rating with either Equifax or Experian before applying for a mortgage. If it's 'bad', it could be worth trying to improve it before applying for a mortgage.
In general, lenders consider a combination of many factors before granting mortgages to borrowers. Other important aspects include the size of the borrower's deposit and proof of income as well as whether they have any debts outstanding or if there is evidence they have been using payday loans.
“When you die your outstanding mortgage gets wiped”
This statement was deemed true by 21% of participants. In the event of death any outstanding mortgage payment still needs to be paid – it can be paid off in full out of the estate by the executor or monthly payments can continue to be serviced. If the mortgage cannot be paid via the deceased's estate, the property may have to be sold. A mortgage can also be transferred, but the party that wants to take it on will have to apply officially in order to be deemed eligible by the lender.
Next up was the aforementioned stamp duty postage confusion, and there were three other false statements that over 12% of participants thought were true:
“The interest rate on a mortgage will last for the duration of the term”
“Deposits are the monthly repayments”
“If you miss one single repayment your house could be repossessed”
According to the results, just 11% of respondents got every answer correct. When buying a home, researching and improving your knowledge is all-important – dedicating time to brushing up on mortgages could prove valuable in the long-run. On top of this, it is always wise to speak to a financial expert or mortgage advisor if it is your first time applying for a mortgage.