Whether you are a first time buyer, home owner, or remortgager it is likely in the short term to become more difficult to obtain a mortgage. This is due to the continued uncertainty in Europe. It is likely to feed through to the banks, putting pressure on their ability to lend, as they shore up their own positions. However, lending will continue with borrowers having to make themselves appealing to lenders to emerge with the prize of the mortgage of their choice.
So, I have compiled a list of tips that will give you more chance of the mortgage you want. Firstly, it is important to ensure that you have a clean credit record and if you are unsure that this is the case, check it out with a credit rating agency. If your record is satisfactory, continue to pay attention to it and make sure that bills are paid on time, and if you have debt, try to pay it down as quickly as possible. This is because lenders take into account your monthly outgoings when assessing your ability to service a mortgage. Worryingly, some lenders assess the affordability using the potential amount of debt you could have, as if you have a maximum balance on card or overdrafts instead of the balances you actually do have. Continuing on the theme of debts, if you feel that your monthly payments are too high to qualify for the mortgage of your choice, it could be worth looking at consolidating your existing debt, and lengthening your unsecured payment term to fit the mortgage criteria.
If you already hold a mortgage and are thinking of remortgaging or moving house in the future, subject to no penalties, I believe it is worthwhile overpaying on your mortgage. It is also worth looking out for old savings account books you may have forgotten about and applying the balance to your mortgage. By taking these steps it will decrease the loan to value you will need in the future as lenders are more than ever adverse to risk, and the lower the loan the better the rate will become. Also if you are looking to remortgage and want to consolidate debt, there are very few lenders who lend more than 75% loan to value for this type of loan. So there is a big incentive to overpay now, to allow a reasonable deal to be obtained when remortgaging. If you are a first time buyer you typically need a 10% deposit to enter mainstream lending and this can be difficult to save when perhaps high rents are taking a large proportion of your income. Therefore, it could be worthwhile discussing with your parents or grandparents guarantoring, gifting, or loaning the money to you, to allow you to get on the housing ladder.
More general tips to increase your credit score include not moving your bank account, not changing address, not changing jobs and making sure you are on the voters role. The reason for following these tips is to improve credit score, as lenders like stability and any changes could lower your score that could mean your loan may not be granted. However, it is worth mentioning that if you are contemplating any changes after the mortgage has completed, then make sure that the mortgage you take out is affordable and that you can afford the payments.
Kieron Bassett Financial Services have two Independent Financial Advisers who specialise in mortgages. Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or visit www.kieronbassett.com.
Kieron Bassett DipPFS
28th May 2012
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