People often complain about how difficult it is to take out a mortgage. Well, when you are borrowing more money than you ever will again in your life, it probably is a good thing that there are a few hoops to jump through to make sure you can keep ahead with repayments further down the line.
That said, there are a few tips which anyone looking to get a new mortgage should follow in order to make the whole process a little more straight-forward.
#1 – Get Your FINANCIAL House In Order
Before you’ll be able to take out a mortgage to buy a house, it is important that you get your financial house in order first. Make sure that you have an accurate “personal financial statement”. Just like for a company, this should include your balance sheet and profit & loss.
In personal non-accounting language, your balance sheet is effectively your net worth as calculated by your assets less your liabilities. Your profit & loss is then your monthly income and expenses. If you have a tight grip on these, you’ll find it much easier when the mortgage lender starts asking you questions about your financial position.
#2 – Don’t Go Running To Your Bank Manager
Historically, the majority of people wanting a mortgage went to the bank which they had their current account with and asked them nicely for a mortgage. Inevitably, they didn’t get the best deals. It’s crazy to think that people will shop around different supermarkets to get the cheapest bananas, but won’t shop around to get the best deal on the biggest single financial transaction they will ever make.
So, make sure that you go beyond your current bank or current lender and search around the market. One of the most common ways people do this is by approaching independent mortgage broker who will typically look around at a number of lenders. However, there may also be another way…
Just as with the rise of P2P lending, Airbnb, Uber and countless other examples, people are starting to go digital to find the best service possible. The same is true for mortgages. Habito, for example, are an online digital mortgage broker who are using technology to bring the mortgage application into the 21st century.
Their technology compares hundreds of potential lenders in a matter of seconds, and are completely impartial ensuring that you can find the best deal and avoid any bias that your bank “advisor” may have. This can also make the process much quicker, as you can apply for a mortgage on a phone or tablet, and the process can take as little as 30 minutes from start to finish.
This may seem like an obvious tip, but it really cannot be overlooked. The more deposit you have saved, the smaller the amount of mortgage you’ll need to borrow. This helps you in three significant ways. Firstly, by borrowing a smaller total, the mortgage amount becomes much more affordable against your annual gross income. Secondly, as a knock on effect, your future repayments also become more affordable when compared to your monthly income and expenditure. Finally, borrowing a smaller amount will reduce your LTV and therefore can significantly reduce the % interest rate that you’ll be paying on your mortgage.
#5 – Check Your Credit Score
Yes, yes, it’s only a number, but many lenders can be instantly put off by your credit score. Therefore, it’s a good idea to use a free online service to check your credit history and take steps to improve it where possible. This can be as easy as getting yourself on the electoral register, or just updating certain information regarding your credit history that may be misinterpreted by potential lenders. This could be anything from using too much or too little of your available credit, an ex-partner’s credit history or old inactive accounts effecting your application.