Whether you’re looking to take your first step onto the property ladder, or you need to remortgage, it’s important to ensure your finances are in good shape ahead of making your application.
Before deciding whether to offer you a mortgage and at what rate of interest, lenders will examine your finances in detail to assess whether you can afford to take on the loan.
Additionally, they will ‘stress test’ your finances to establish whether you’d be able to keep up with your monthly repayments should interest rates rise.
The following steps should help ensure you’re fully prepared:
Save a large deposit – In the height of lockdown, many lenders withdrew hundreds of mortgages designed for buyers with small deposits. Fortunately, lenders are now starting to reintroduce ‘high loan-to-value’ (LTV) products, and the government has also promised a scheme to allow first-time buyers to take out a mortgage with a deposit of only 5%.
However, to increase the chances of being offered a mortgage on favourable terms, it pays to save as much as you can for a deposit before you apply. Open a dedicated savings account with a competitive interest rate to help you.
Check your credit score – The higher your credit score, the more likely you are to be offered a competitive mortgage deal. Tips to improve your credit score include checking you’re registered on the electoral roll, paying your bills on time, and paying off your credit card balance in full each month.
Get budgeting – Go through your bank statements to see how much you have coming in each month and how much you’re spending on bills and essentials such as food. Close or cancel any accounts, subscriptions or memberships you no longer need.
Repay your debts – Lenders will look at how much debt you have, including whether your current account is in credit. They will also look at whether you are only making the minimum repayments each month as this can indicate you’re living outside your means.
To help pay off what you owe on loans, credit cards and overdrafts, it’s worth using any savings, but leave enough saved to cover emergencies.
Be prepared – Before applying for a mortgage, it’s important to have all the correct documentation to hand.
This can include utility bills, your passport or driving licence, P60 from your employer, the last three months’ payslips, three to six months’ worth of bank statements or, if you’re self-employed, a statement of two to three years’ accounts from an accountant and tax return form SA302.
Get advice – Choosing the right mortgage deal can be a challenge, which is why we’re here to advise and support you throughout the mortgage process and help you find the right deal for your circumstances.
Your home may be repossessed if you do not keep up repayments on your mortgage
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(Your home may be repossessed if you do not keep up repayments on your mortgage)
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