Now that we can offer mortgages here at Yellow Brolly HQ, the topic has come up in lots of our conversations.
Opinions vary, my mother (aged 68) stated that it is easy to get a mortgage. Others say it is confusing and they would have no idea where to start…
Now my lovely Mum has no experience in the world of mortgage advice apart from when she has been arranging her own and trust me, she has had a few as her and my Dad are proper ‘doer uppers’ of houses so they have moved a lot.
She will be basing her opinion on her personal experiences as we all do.
Both have been employed on permanent contracts for all their adult working life, so one would imagine that, yes, it has been straight forward for them to get accepted for a loan.
WHAT DO YOU ACTUALLY NEED TO DO?
You need to provide evidence of affordability for the amount you want to borrow.
(If you want to work out how much you can borrow, there are calculators on most of the lender websites, you fill in the information and they will come up with a figure. This is intended as a guide only not a guarantee).
If you do want to apply for a mortgage, the lender will want evidence of regular income coming into your bank account. All they are trying to do is satisfy themselves that you will be able to meet the monthly mortgage payments and with enough to spare to live and pay for the other things in life that you must pay for.
They will use payslips for this (some require 3 months/some only the previous month).
If you are self-employed expect to prove at least 3 months of income and then up to 2 years’ worth of tax returns. They will want this to show that you have a proven track record of work for a decent period, that shows a level of earning that supports what your income is.
Commission and overtime.
If you receive overtime or commission regularly and you want to use this to count towards your affordability, you will need the last three months at least showing a consistent level of either and for the level to be reflected in your last year’s tax returns. A percentage of this type of income will count towards your overall affordability.
The kicker is that all the lenders have slightly different criteria that they use for their different mortgage products.
So, the good news is that if you weren’t offered a mortgage with one lender, you may well qualify for one with an alternative lender.
What if I have just started a new job?
If you have and you have a contract, then you can use this and/or a letter from your employer stating what your income is going to be.
Should I use an Adviser?
Using a broker/adviser/specialist firm means you will have someone to assess your circumstances and they will do their best to find you a great deal. Some have access to a limited number of lenders, and some will be able to check the whole market for the best deal for you, they should tell you this information when you have your initial chat.
But if you have advice, you will be covered by the Financial Ombudsman if things go wrong!
If you simply ask the lender/bank that you already use, you are limiting yourself to their products alone, the advantage of this is that they will already have all your details, so this could be less hassle. Using a ‘whole of market’ broker will gain you access to a range of deals from a wide variety of lenders, so you could end up getting a better deal.
WHAT ELSE WILL I NEED TO DO?
Get your finances spring-cleaned if they need it.
Make sure your finances are given a spring clean, that you know what goes out regularly, use your overdraft less, reduce credit card debt if you can. It has never been easier to manage your finances with banking apps and other apps that help you save or invest too.
Don’t have a baby, change your business to an Ltd company or decide to go self-employed and then apply!
The best way we can describe it is to make sure your financial circumstances are ‘settled’.
Lots of people now are very good with their own financial planning, we love a client that can send us an excel spreadsheet with income and expenditure on it.
WHAT DOCUMENTATION WILL I NEED TO PROVIDE?
It really depends on what the lender asks for.
Usually, this will be bank statements/payslips/P60’s/SA 302’s/accounts; evidence that what you have said goes in and out of your bank account all matches up and that it has been the same (or increasing) for a consistent amount of time. They will always use the lowest figure based on the evidence that you provide, so if your commission has dropped in recent months, they will use the lowest average of this, even if it has been higher for years before, they will go on the most recent numbers.
You will probably be asked for a form of ID too, passport, driving license etc. Your broker will want to make sure you are who you say you are.
Remember your mortgage broker is acting for you, doing the work for you and sourcing you the best deals, so if they ask for something it is because they need it for the lender they are dealing with on your behalf.
THEN WHAT HAPPENS?
You will get a ‘quote’ from the lender.
Once the lender with the best most appropriate deal has been sourced, you will be issued with a quote, or ‘decision in principle (DIP)’ also sometimes called ‘agreement in principle (AIP)’.
This has a lot of information on it, but it will give you a clear indicator of what you can borrow, over how long, how much it will cost you each month and the cost of borrowing the amount over the term of the mortgage (the interest). This will help when you are looking at properties (as some will request that you have this anyway even before they allow you to book an appointment, avoids time wasters and nosey buggers), plus you will know what level of properties you should be looking at.
Also having this document will make it easier to compare deals with other lenders, ask for them if you want to see any alternatives, you are fully entitled to do this so don’t be afraid to ask.
So, in a nutshell, IS IT easy to get a mortgage?
It can be straight forward to get a mortgage if your ducks are in a row. The larger your deposit is, the more (and better) deals you will be able to access, and using an adviser gives you more protection in the long run if you find yourself locked into an unsuitable deal. There are many things to consider that haven’t been mentioned in this blog, so don’t rush into any decisions!
Like with anything, shop around until you find someone you get a good feeling for, this is no small decision and if you develop a good relationship with your adviser, you can use them for years!
If you have any questions or would like to begin a conversation with us regarding mortgages; WhatsApp us at 07850 346330 or drop us a message through the contact us page & we'd be happy to help you out. :)
Your home may be repossessed if you do not keep up with your mortgage repayments.