For many first-time buyers and home movers the first question they ask is ‘how much can I borrow?’. It’s often followed by ‘which is the best deal?’
And the answer to either isn’t straightforward.
In today’s mortgage market your affordability is carefully scrutinised, meaning what you can borrow doesn’t just depend on your income. Instead, lenders will carefully check your credit record, your spending habits and your financial commitments.
As for the best deal, it depends on your finances and preferences, as well as your attitude to risk and your life stage.
But with some careful budgeting and the right advice before you apply for a mortgage, you can boost your borrowing power and ensure you get the right deal for your needs.
One mortgage broker – One77 Mortgages – has published its inside tips for homebuyers to secure a great mortgage.
Managing director, Alastair McKee, said: “The mortgage market can be a minefield of jargon, small-print and confusing figures, so it’s no surprise that for many homebuyers and first-time buyers, in particular, the mortgage product they opt for isn’t always the best suited for their situation.
“But with a little bit of research, there are plenty of things you can do to secure a much better deal and make your mortgage work for you, not the other way around.”
Top tips to max your mortgage
Increasing your deposit by just a small amount can boost you into the next Loan to Value band, meaning a better rate and even potentially less onerous credit scores with lenders. Always work on 5% increments as these are where the best deals are for your price band so based on the current average house price, rather than borrowing 9% (£20,533), stretching the additional few thousand more to a 10% deposit of £22,815 will be far more beneficial in the long run.
Get your personal details in order
If you’ve failed to update documents to your married name, or you aren’t registered to your current home address, the lender’s computer will literally say no as it won’t be able to find you. This is a shortcut route to having your application declined.
Once your details are correctly registered, register for the electoral roll. You might not know it, but this has a huge bearing on the scoring system of lenders credit. If you aren’t registered it’s another minor little detail that can see you fall at the first hurdle of a mortgage application.
Forward your post
The £60 it costs to have your mail forwarded for a year will be the best money you’ve ever spent without even realising it. This doesn’t necessarily apply to your mortgage but it will save you money. All too often a client moves house and ended up with a default notice on their phone bill or credit card as they’ve not received the reminder and forgot to pay it.
Don’t forget life cover
With the cost required to get on the ladder, many of us can be forgiven for skipping the add ons a broker may suggest. If there’s one cost you don’t want to skip on, it’s life cover. Understandably, many of us today can only get on the ladder with the help of our partners as a joint income is required. However, if the worst were to happen and illness or even death strikes, the lack of any form of protection cover can result in the whole deck of cards coming crashing down immediately. This is the last thing you need in this situation, so make sure your life cover is in place and up to date.
Overpay where you can
If your mortgage product allows overpayments – make them! You would be surprised at how much even a small overpayment can make on a monthly basis when it comes to the total interest over the lifetime term of your mortgage.
Lock it in
We’re currently in the middle of an artificially low, interest rate cycle and mortgage product affordability is close to record lows. Great news but make sure you lock in on a fixed rate mortgage to make the best of the current climate. However, be aware of any 10 year plus fixed rate products. The fee might be great but over the years we’ve seen best-laid plans fall by the wayside and clients are then hit with huge early exit fees if they need to move or pay their mortgage early.
Any overtime worked can be beneficial towards mortgage eligibility but try to ensure that this overtime is consistent as possible. If there are drastic swings in the hours worked, lenders will often work from the lowest figure when deciding your position in the market.
Knock them down
It’s a buyers market at the moment and if you have the confidence, income and deposit, now is the time to get a great deal on a property by negotiating as hard as you can. As many buyers remain sitting on the fence, sellers are having to adjust their price expectations and the best way to reduce your mortgage costs are to get the property you want for a lower price in the first place! The average reduction is about 10% of the asking price, so use this as a benchmark and push for 15% or more.
If you’re looking to buy right now and your credit score is no good, then you’ve probably already had a few lenders slam the door in your face. Your credit score is everything to a lender in this day and age and poor payment history or a low score will put you at a severe disadvantage from the offset. Do all you can to cultivate a healthy score starting NOW and as most lenders base their judgement on Experian, it’s worth the small investment to make sure your reading from the same hymn sheet rather than one of the free credit score providers.
Source: By Christina Hoghton