Improve Your Mortgage Chances
If you are property owner or a first time buyer, here are some things that give you a better chance of obtaining the mortgage you want.
Start with your credit history
Whatever type of mortgage you want, start by checking your credit report.
A credit report is the history of what you've borrowed, such as loans, mortgages and credit cards, plus your repayment record and other information that lenders take into consideration when they decide whether you are a good risk.
In other words - it's what lenders see when they're checking you out. And you want to make sure everything that's on it is proper and up to date!
Items in your credit report, along with details from your application, are used to calculate a credit score, which will determine whether you receive an offer and how much interest you will pay. So it makes sense to ensure that everything accurately reflects your circumstances.
You can check your Experian credit report now, using a free trial of a service called CreditExpert. It's your first step towards taking greater control of your finances.
Check your credit report for free online.
100% mortgages are no longer available and even 90% -95% deals are now very rare if available at all. So for many of you, the traditional 5 or 10% deposit is unlikely to be enough.
Before you submit a mortgage application you should consider the following:
- Save monthly in a high-interest account to build up a deposit and take advantage of any fall in house prices
- If you've had problems repaying credit in the past, then work to improve your credit history: pay bills and credit card balances on time, don't take out more credit, and try to pay off any outstanding amounts. You should also register to vote, as this can count in your favour with lenders
- Buying with another person or shared ownership. It's not just housing associations that can help you get your first property, some house builders are offering this service and some may even help you find a suitable mortgage. Check out the Open Market HomeBuy scheme; from 2009 the Government has offered a £1,500 grant to first-time buyers under this scheme but the offer is likely to apply only to key workers.
If this is the year when your fixed rate mortgage expires, improve your chances of getting an affordable replacement deal:
- Start looking early. Good mortgage deals are over-subscribed, so applications can take longer than expected to process. Thus you need to start hunting for a replacement mortgage around three months before your current deal expires.
- Look for a mortgage adviser who covers the entire market. A good adviser will hear about special offers and know what's been withdrawn long before you can find out for yourself. You also need to factor in any transfer or application fees; these have risen in recent months and so you might be better off staying with your existing lender, even if the interest rate is a little higher than you can get elsewhere.
- Pay off as much of the mortgage as you can before you apply. The more equity you have, the better your chances of getting a good deal. The best offers are currently available only to people who own at least 25% of their property outright.
- If there is a reason why you've skipped any repayments in the past, contact the credit reference agency that has your credit report (Experian being the UK's largest) and ask to add an explanation. For example, you might have been ill or had an accident; lenders will see this and may take it into account.
Some experienced landlords are seeing falling house prices as an opportunity to snap up bargain properties. If you've assessed the risks and still want to invest in buy to let:
- You will almost certainly need a 25% deposit plus arrangement fees, which are typically higher than for owner-occupiers
- Be realistic about potential rental income; mortgage lenders are now looking for rents that will cover 120-130% of the mortgage to act as a buffer and fund maintenance
- Check the small print carefully; look for unexpected fees when assessing a mortgage or contract with a letting agent, and for loopholes in tenancy agreements
- Make sure your credit report demonstrates that you are a responsible borrower who has made repayments in full and on time. If you have been through a bad patch in the last few years, missed repayments or been turned down before, it may be better to wait to until your credit history looks better to mortgage lenders before you dip into the property market.
Getting a mortgage quote
If you do indeed think you've got good chances, the next step is to speak to an unbiased mortgage adviser!
The benefit of an adviser is that they make quick, unbiased comparisons from across the whole market for you in order to recommend a suitable deal. They then see this all the way through to completion. This saves you time and money compared with sifting through quotes and small print from a handful of lenders by yourself.
To get a range of mortgage quotes and a personal recommendation, click here to speak to an unbiased mortgage adviser.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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