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Advice On
Mortgages
Getting prepared for your mortgage application.
Simon Walton
Director | Mortage Advisor
Getting Prepared For Your Mortgage
When preparing for your mortgage, getting everything ready as much as possible is essential. The more organised you can be, the quicker and more straightforward the process will be for you and your mortgage journey.
One of the key elements to obtaining a mortgage is your credit file. That doesn’t mean you’re not getting a mortgage if your score is bad. Your credit file is a key element because it tells the lenders how your financials stack up in the past. So, for example, if you have a score of 684/999 but there isn’t any indication of bad credit, for example, no payments missed, no CCJs or any other financial concerns, then the score won’t be considered. If there is existing credit, that will also be fine if it doesn’t exceed around 25% of your total income.
For example, if you have a credit card debt of £11,000 but your total annual income is £40,000, your credit card debt is over the 25% barrier, meaning the credit could be considered when applying for your mortgage.
If you want to check your credit file, which includes data from 4 Credit Reference Agencies, not just 1, try it FREE for 30 days; click the link HERE. (If you don’t cancel with your 30-day free trial, it will renew at £14.99/month.)
Another thing to prepare for your mortgage journey is your financials. Do you have your savings ready for your deposit? Can you pay existing debt with your savings? Have your friends been sending you money they owe but with hilarious references? (Unfortunately, lenders don’t find them hilarious). Are you about to buy a new car? And the list goes on. We all have lives and need to live, but we recommend, especially if you are a first-time buyer, to look after your financials 3-6 months before starting your home-buying process.
Think about your purchases more holistically, and ask yourself questions like… “Do I need this new car?” “Can I afford to pay my credit card debt without affecting my home deposit?” and my favourite, “Should I tell my friends to stop sending me money with the reference ‘Massive *****”. As we said, we find them hilarious, but unfortunately, sometimes lenders do not.
When to begin seeking mortgage advice?
So, now that your credit file is looking sharp and your financials are ready, what’s the next step in your process? The answer is simple: it’s time to get some mortgage advice. Before you start booking meetings with estate agents to look around houses you may be interested in, it’s best to understand your affordability and criteria. There is no point in looking at a home, getting excited and then finding out it doesn’t fit your affordability (budget).
Mortgage brokers have the perfect tools to work out your affordability, whether a single or joint application, based on your circumstances, for example, your bills, your credit file, whether you have dependants, and your wages, including bonuses.
As mortgage brokers, we say there are two elements of affordability. The first element is finding out if your income and outgoings allow for the amount you want to borrow and if you will be accepted for that amount.
The second element is a real-world indication of how much your monthly payment will be. Is that amount affordable? Because, at the end of the day, in the real world, it’s all about being able to keep up with your monthly payments and still be able to live.
So now that you have had some advice on mortgages, you are ready to tackle the seller’s world. Suppose you have evidence of speaking with a broker (affordability or decision in principle). In that case, the estate agents and sellers are more likely to take you seriously, as you have shown you have the funds to purchase the house. Trust us; you will also feel the same when it comes time to sell your home.
Mortgage brokers have the perfect tools to work out your affordability, whether a single or joint application, based on your circumstances, for example, your bills, your credit file, whether you have dependants, and your wages, including bonuses.
Why should you use a mortgage broker?
Pros of getting advice on mortgages
- When it comes to using a mortgage broker, you will be guided through the next steps, the time scales, and assistance on whom to use for certain elements. For example, which solicitor is best for them, lenders, insurance to protect yourself, Etc.
- Access to exclusive deals to which you (the public) wouldn’t usually have access.
- Usually, mortgage advisors have access to 100+ lenders, so if one says no, there will be others to apply to.
- If you have any problems putting particular paperwork together or with specific evidence required, a mortgage broker can guide you through alternatives or solutions.
- Pre-checks to application. So rather than blindly applying repeatedly, a mortgage advisor will check with the lender first before applying, speeding up the process.
- Most brokers are regulated, meaning our FCA (Financial Conduct Authority) guidelines check us over; we must comply with the FCA rule book, put our clients first, and always strive for the best deals.
Cons of getting advice on mortgages
- Some brokers will put their agenda above yours; you can spot this if your asking questions about lenders, and they keep funnelling you to only one or two lenders.
- A broker can sometimes dismiss you very quickly, knocking your confidence in getting advice on mortgages. You can spot this by checking with another broker, don’t just go on what one broker says.
- Laziness. If you don’t fit the criteria of a perfect client, you will sometimes find a broker who will dismiss your case and leave you stranded if you don’t have an ideal credit score or don’t want to borrow enough money. Again ask questions and make sure the broker a good fit for you too.
The different types of mortgage brokers
Without any prior knowledge of the world of mortgage advice, it would seem that every mortgage broker is the same, whether they are independent, the one you meet at the estate agents or one who works for the bank. But this isn’t the case.
There are different types of brokers, and you need to know the difference and why. So here is a list of the types of brokers you might come across and why they may or may not be able to help you.
Tied Mortgage Broker
These brokers are tied to a single lender, and you will usually encounter this type of broker in a bank. Yes, they will be experts on this one lender, but the problem is that they give you limited access to deals.
Multi-Tied Mortgage Broker
A potentially better option than a single mortgage broker as they have more lenders to offer and usually work with a single panel of lenders, giving their clients more comprehensive access to deals but still not the whole market.
Whole Of Market Mortgage Broker (Mortgage Advisor)
This type of broker can source mortgages from the whole of the available market, giving you access to diverse mortgage deals. Giving you the best chance when applying for a mortgage.
How much does it cost to use a mortgage broker?
When using a mortgage broker for advice, it can sometimes come with a fee, and the fee amounts can vary from £0.00 (fee-free) to a percentage of the total amount you are borrowing. Some would ask, if there is the option to choose a fee-free broker, then why would I select a broker that charges a fee, especially if it’s not a fixed fee and is a percentage of the amount I want to borrow.
When selecting a broker, you should check the track record of that broker (check the broker’s online reviews), get a feel of what you need from that broker (extensive research with lenders due to your credit file/circumstances) and what are your circumstances (are you self-employed or is this your first home). There are several reasons to choose a particular broker, and if your case needs more work than usual, then maybe going with a broker who charges a fee is going to be best; let me explain why.
As mortgage brokers, we can get paid a commission from whichever lender we put you. Still, we won’t get this commission until your mortgage completes, which can take time, especially if your case requires more work to get that competition. Because of this, we might not get paid for some time, which could result in you wanting to cancel because of the decision made by the lender, which means we have done all the work for no pay.
So what does that mean to you? You might find that the fee-free mortgage broker might want to do the minimum work until they know they are guaranteed the commission payment, which might mean they won’t help you because of your circumstances, and you will be left stuck and time wasted. I want to add that this is just a personal opinion from a unique experience.
Keeping up with your payments
Earlier in this guide, we discussed affordability and how we may be able to apply for a mortgage of a specific size, but we must ask ourselves, should we apply for that amount? We would not recommend applying for a larger-sized mortgage just because ‘you can’. Yes, it would mean that you can purchase a larger home, but if you can’t keep up with the payments and upkeep of a larger home, you could potentially lose it. ‘Your Home may be repossessed if you do not keep up repayments on your mortgage.’
Renewing your mortgage
When taking out a mortgage, you will usually be presented with a type of mortgage deal, including a fixed-rate mortgage, discounted rate mortgage, tracker mortgage, capped mortgage and so on. Towards the end of your mortgage deal, you should seek advice from your mortgage broker/lender (remember, you arent tied to one broker) to discuss the next steps in renewing your agreement so that you don’t get put on the lender standard variable rate package, as this could increase your payments.
Mortgage Protection
The one thing we all need but never discuss. When taking on debt in the form of a mortgage, it is essential to make sure you have that debt covered so that if something were to happen, you would be protected financially. We work so hard for the things we have, and the last thing you want is to lose it all with something you could have prevented. When it comes to protection, you can cover yourself for various things, from death, becoming critically ill or being unable to work due to illness or accident.
This is why we always recommend mortgage protection to protect you and your family in the event of a death or a critical illness, as well as income protection to protect your wage if you cannot work due to illness or accident. These protection products will help keep you in your home if something happens to your health.
Summary
In summary, as mortgage advisors, we would, of course, always recommend using a mortgage when possible, especially with the options that become available when using a broker. But we suggest researching brokers and even using a broker with whom your friends/families have had success. Don’t limit yourself to just using a limited broker (bank); give yourself the best chance to apply for a mortgage. Remember, this whole process should be designed to help you and your circumstances.
It’s also important to note that your Home may be repossessed if you do not keep up repayments on your mortgage.