Things you should know…..
Whether you’re a First Time Buyer, looking to move home, Re-Mortgage to a better rate or purchase a Buy to Let investment property getting the correct advice is essential.
A Financial Adviser / Mortgage Broker can provide you with much more than your own bank or building society. Not only will they have access to a comprehensive range of lenders and rates they will also have the knowledge of the different criteria and lending policy of these lenders and when you are looking for the right mortgage for your individual requirements this knowledge and expertise is invaluable.
All lenders will carry out a mortgage affordability calculation to confirm the size of mortgage available taking into account your income, liabilities, living expenses and mortgage term etc. However, there is not one calculator that is used by all lenders they each have their own formulas and take slightly different things into account. A Mortgage Brokers knowledge could make the difference in sourcing the lender that will allow you to buy your dream home!
Credit Scores and Scoring
The majority but not all lenders will use credit scoring in reaching the decision to lend as well as reviewing the contents of your credit history/file. The three main credit reference agencies each offer online access to your credit history and a credit score but the credit score from these companies will not necessarily be the same score that you will get from a lender but is a guide. The lenders will each use their own score card and will have different pass marks for lending depending on the loan to value (ltv) you are requesting. The contents of the credit history/file can also override the credit score so even if you have a good score with the credit agencies the lenders criteria my override the score if you have had defaults / Court Judgements or decrees etc.
It is a good idea to have a look at your credit file so that we can review it contents and make sure there is nothing that can prevent you getting a mortgage. A copy can be obtained by registering with www.noddle.co.uk which is a free service provided by Call Credit or from www.experian.co.uk or www.equifax.co.uk who offer a free month’s trial and then an ongoing monthly fee.
If you are not registered on the electoral roll – register know as this may help improve your credit score.
While in an ideal world no credit (loans or cards) is what you want this is not the case when you want a mortgage. If you have never had any loans or credit/store card there is nothing to score so you will not have a good credit score so if you are looking to purchase and need to improve your credit score taking out a credit card can help. Use it to fuel up the car and then clear the balance in full every month so you build up a good record or regular payment, don’t miss any or be late!!, and don’t be tempted to run up a card balance that you cannot clear as this will impact on the mortgage affordability.
If you do not usually keep your payslips and bank statement and shred them then STOP!!!
A lender will require documents to verify your income and will typically require your last 3 months payslips, P60 and between one and three months bank statements if you are employed. The self-employed will usually need to provide 3 years’ accounts and/or HMRC SA302 tax calculations and Tax Year Overview statements but again the lenders each have their own document requirements. As mortgage brokers we will again be able to discuss the lenders document requirements and recommend lenders appropriate to your individual situation. So if you have only been self-employed for a year or are a contractor working via your own Ltd company do not despair!
The lenders will use your bank statements to cross check against payslips in verifying your income but will also review the contents and there are some things that they do not like to see. While there is nothing wrong with the odd bet on a sporting event or a game of Bingo the proliferation of online betting and Bingo sites has made it far easier to do at the push of a button on your smartphone or tablet. If the activity on these sites is seen as high, whether you are winning or not, in relation to overall income then a lender is unlikely to lend.
Overdrafts – Lenders usually do not have an issue if you use an overdraft provided you are not permanently in overdraft and that when you are it is within the agreed overdraft limit. If you do go slightly over the limit provided this can be explained, then they may be okay lending.
The bigger the deposit the better the rate of interest available and a lower credit score required to lend. It makes sense to try have the smallest mortgage you can but trying to build up a deposit for First Time Buyers can take time unless the bank of Mum & Dad can assist with the deposit. Lenders do offer loans with only 5% deposit but the rates of interest are higher than if you have 10% deposit and this is where all lenders start to offer rates although if the property is New Build house or flat the deposit required by most lenders is higher Typically 15% or 20%.
The deposit require will be based on the purchase price or valuation whichever is the lower so if you pay over valuation for a property you will require the deposit (5% or 10% etc) plus the amount over valuation paid.
There are a number of Government Schemes available to assist First Time Buyers and Home Movers and for New Build Property the Help to Buy scheme is a Shared Equity scheme where only a 5% deposit. I will be covering how these schemes work in a separate post.
The purchase or refinance of your home is one of the biggest financial commitments you will ever make and getting the correct advice and reviewing all the options is essential. We have been providing advice and arranging mortgage for clients in Aberdeen and throughout the UK for 25 years and as Financial Advisers can provide the advice you require and arrange the mortgage and insurance to protect your home.
To discuss your plans, get in touch to arrange a Free Initial Mortgage Consultation and starting planning for your future.