Guide to making a mortgage application

No matter what sort of mortgage you are looking for (whether you are a first time buyer; someone who already has a mortgage; or someone looking to remortgage), how you go about your mortgage application is very important. Some people may want to do their homework first and go direct to a lender, while others may want to use a mortgage broker.

So what is the difference?
Going direct will typically save you mortgage brokers’ fees, but unless you are 100% confident that your circumstances meet your potential mortgage provider’s lending criteria, then you may wish to bite the bullet and use a mortgage broker.

Mortgage brokers
Each bank / lending institution typically has its own criteria for approving a mortgage. As an example:

• some will be happy to lend to a self employed person while others may only want to lend to someone who is not self employed and who is full time employment with someone else;
• some lenders are sympathetic to those who may have a less than perfect credit history (this is your financial record that details all your financial goings on for the last six years including whether you have missed any payments) while others will only accept those people with an credit history;
• Young, first time buyers who may not have built up a credit history may also find that some lenders will not approve them for a mortgage.

A good, experienced and reputable mortgage broker may typically know which lender would be most likely to accept you for a mortgage. They may also sometimes have access to online deals not available on the High Street.

You may think: “So what? I’ll keep submitting a mortgage application to different lenders until I am accepted”.
The problem with this is that each time you apply for a mortgage, a credit history check is done and is recorded on your file. If you have several checks done by different organisations in a short period of time (which would typically happen if you applied to one lender after another), a potential lender may look at your file and think:”Why has this person been declined a mortgage by the X Bank? If they have declined them, what is wrong with them?” Plus, multiple or a quick succession of mortgage applications can often smack of financial desperation – again, another potential turn off for lenders.

Going with a broker may mean you can utilise their experience and that you may have a better chance of being accepted for a mortgage. A broker will also do all the chasing of the lender on your behalf, meaning a little less stress at a difficult time.

Of course, whether you decide to submit your own mortgage application yourself or via a broker is up to you. But if you go down the latter route, ask around among friends and family as to whether they can recommend a good mortgage broker. And before you sign up with a broker, check out what any broker fees may be in connection with your mortgage application.

How to clean up your credit file when applying for a mortgage

If you are thinking about applying for a mortgage, it makes sense to be sure that your credit profile is as good as it can be. By following the tips we have put together here, you can be sure that there will be no surprises for you or your lender.

• Check your credit file. This is something you should do regularly anyway, but it is even more important before you apply for a mortgage. For a very small fee, you can obtain copies of your file from the credit reference agencies, Equifax, Experian and Callcredit. This will let you check that the details they hold are up to date and correct. If any details are wrong, such as showing that you have missed a payment when you haven’t, ask for the file to be corrected.
• Set up direct debits. If you have regular outgoings, such as mortgage payments or utility bills, set up direct debits to pay them. Not only will this make it easier for you to manage your money and reduce the chances of you missing any payments, it lets lenders see that you are organised and committed when it comes to paying bills on time.
• Settle outstanding debts. If you have missed any payments for anything, get the account up to date as soon as possible. If your credit file shows that you haven’t stuck to an agreement, your credit score could well be reduced as the lender may see you as a higher risk.
• Get on the electoral register. Make sure you are properly registered at your current address, as all lenders have to verify your identity in order to comply with money laundering regulations and prevent identity theft. If you aren’t on the electoral role when you apply for a mortgage, the lender may reduce your credit score or even reject your application altogether.
• Don’t make lots of applications. In the months or weeks before you apply for your mortgage, make sure that you don’t apply for lots of other things, like loans or credit cards, which require credit checks. Every time you are credit scored it is recorded on your file, and lenders may see a lot of credit checks in a short time as a sign of someone who might be struggling to manage their money. If you see credit checks on your file that you don’t remember, ask for them to be removed.
• Check any related accounts. Your own credit file might be clean, but it is important that your partner or anyone else who is applying with you checks their file in the same way as any adverse information will also affect your application.

Understanding mortgages - how to find a good deal

With so many different types of mortgages to choose from and a wide variety of lenders offering these products, it’s little wonder that so many of us find it hard to get a good deal. It makes sense to do this however. The money you pay every month to service your mortgage will almost definitely be the largest payment you have to make. Getting a good deal could simply give you lower monthly repayments and the added bonus of knowing that you’ll pay back as little interest as possible.

So, what steps might you take to make things easier? The first step you may want to consider is what kind of deal might suit you best. Mortgages all come with the same aim — you borrow money to buy a property and then repay what you borrow and the interest charged by your lender over a period of years. But, not all products here work in the same way and there are many different types of deals to choose from.

You might want to therefore do some research first of all into the options on offer. The more you know here, the better. Even a quick visit to a lender’s website, a financial advice portal or an online mortgage comparison site should be enough to show you the basics of the deals you may want to consider.

Next, you might want to think about where you go to get your deal. A simple solution may simply be to pop into your local bank or building society to see what they have on offer. Many people, however, prefer to dig a little deeper to see what is on offer in the sector as a whole. Finding mortgages is in a way just like shopping for anything else — if you shop around then it may be much easier to find the best deal to suit you.

There are various ways of doing this. These include:

• The ‘Do It Yourself’ approach: Here you might simply do your own research by approaching lenders to gather information on rates and deals either from branches or from their websites.
• Online comparison sites: Many people like to do initial research here by looking at financial comparison sites. You might, for example, use a site to get a quick and simple snapshot of available rates and deals without having to do the work for yourself.
• Mortgage specialists: As an alternative you may prefer to use the services of a specialist who can help you find deals and rates across various lenders in the sector.

Mortgages may all work in much the same way but they are not always equal. For many of us the main aim here is to get an affordable monthly repayment that suits our circumstances and that keeps our interest costs as low as possible. Like many others before you, therefore, you may well find that shopping around before you sign up for a deal will make the best sense.

Six Tips for First Time Mortgage Buyers

Getting onto the property ladder for the first time can be a daunting experience – not least due to the massive amount of information out there when it comes to mortgages. How do you know which one to choose? What if you make a mistake? After all, this is a very big decision.

However, help is at hand. Below are six tips on how best to approach the mortgage question if you’re a first time buyer.

1. Think about what you need from a mortgage.
Believe it or not, mortgages are not just a one-way street: you need to find a system of repayments that works for you. If you don’t, you may find yourself struggling to keep up financially, which can cause unnecessary stress and worry. Similarly, if you get a mortgage that doesn’t provide what you need, you may find yourself settling for a property that isn’t right for you, which can cause problems further down the line. The key is balance – a little forethought goes a long way.

2. Don’t overreach yourself.
If you’re a first-time buyer who’s previously been living at home with your parents, you’ll need to take into account additional expenses (bills, rates, council tax, etc) when you’re budgeting how much you can afford to repay on your mortgage. Similarly, you’ll need to make sure you can afford the repayments even if interest rates rise. If you forget this, you could find yourself in a serious financial pickle later on.

3. Don’t be afraid to ask for help.
The mortgage market is confusing, especially if you’ve never done it before. Most providers offer the services of a mortgage advisor, who’s specially trained to help you work out exactly what service would best fit your circumstances.

4. Don’t just go for the first mortgage that comes along.
It can be tempting to settle for the first mortgage that seems to meet your criteria, but this is rarely the right one for you. Of the hundreds of mortgage packages out there, what are the odds that the first one you settle on is going to be a perfect fit? Pretty slim. Take a little bit more time to scout around the markets and see what’s out there. You could save yourself a substantial amount of money, and even if you don’t, you’ll have the satisfaction of knowing that you have the best possible package for you.

5. Read the small print.
No one likes doing it, but it’s important to know exactly what you’re getting yourself into – after all, a mortgage is likely to be one of the biggest set of repayments you ever find yourself making.

6. Try not to worry.
Moving house is stressful enough as it is. There’s enough support out there to make sure you don’t have to struggle unnecessarily with the question of your mortgage, and (while it definitely needs to get sorted) it doesn’t have to be the minefield that many people make it. Congratulate yourself for getting on the property ladder, and don’t forget to enjoy your new home.

Short guide to mortgages

Mortgages are a way of life for many people buying a home in the UK. The British in particular seem to have a particular tendency towards buying a home at the earliest opportunity, and funding this usually means going to the bank for a loan. In this sense a mortgage is essentially a generic title for a loan used to buy a house. But the market can be quite confusing to somebody who has not explored it before, and all the different products available can be baffling.

To get a mortgage you will normally need to provide a deposit, ie a certain slice of the value of the house you want to buy. So say someone is buying a house worth £100,000, and they are applying for a loan following a 10 per cent deposit, they will need to put up £10,000 to begin with. Some providers have been known to offer 100 per cent mortgages, ie the entire total of the home value, but these tend to be relatively rare, and can even disappear from the market completely during difficult credit times.

With any home loan, the bank reserves the right to repossess the property from you if you cannot keep up with their mortgage repayments. However, this is usually a last resort after a bank has tried other methods of reasoning with you, and it will normally only be attempted when it is quite clear you are never going to be have to pay the money back. However, it is extremely important to keep up with repayments as repossession is a stressful and life changing event. Therefore it is important to get a mortgage you can deal with.

Most mortgages are repayment-based, involving paying back the total amount in instalments plus interest. There are sometimes a limited number of products available which involve only paying back the interest, meaning someone must put aside capital to eventually pay for the house.

Many variations of mortgage products relate to the interest rate. For example, a variable rate mortgage allows someone to pay back the money with an interest rate which goes up and down according to the base rate set by the Bank of England every month. In contrast, a fixed rate mortgage involves an interest rate which stays the same for a set number of years, perhaps two to five, before the rate then changes and goes on to a variable one. Fixed rate deals have proved popular with people who are buying a home for the first time and are getting used to the burden.

There are also capped rates, which involve an interest rate which is flexible but never rises above a certain percentage or ‘cap’. While banks are all too happy to offer somebody a mortgage with an attractive initial interest rate, it is perhaps worth paying close attention to how mortgages will be worked out after this period ends because home loans are typically large and lengthy commitments.