Recent events in the USA are having profound effects on the major banks in this country. Consequently they are now likely to be even more twitchy about who they lend to. So if you need to get a mortgage you’re going to have to be squeaky clean. Here’s a few tips on how to get your house in order so that you can attract those few good deals that are still available.
Credit history is probably the most important factor. If you’re having problems getting the loan that you want then should get a copy of your credit report and start checking it for any abnormalities. Lenders use your credit report to assess whether or not you are a suitable candidate for a loan. If there are late payments, written off debts or Country Court Judgements (CCJs) on your file, it will count against you.
Credit reports are kept by two companies; Equifax and Experian. You can view the basic files on line at www.equifax.co.uk and www.experian.co.uk but if you want a more complete report you will have to pay. Although you can’t change any bad credit history you can check the file for inaccuracies, because sometimes they get it wrong. As long as you can produce evidence, by writing a few letters you can get any mistakes rectified and therefore improve your chance of getting the loan you want.
If you’re a first-time buyer you’ve probably realised that the traditional 5% deposit is not enough. To improve your chances of getting a mortgage you must save as much as possible in a high-interest account; the bigger the deposit the better mortgage deal you will get and with house prices coming down at the moment, it makes great sense. Make sure that your credit history is accurate and up to date and make sure that you’re on the electoral register. Believe it or not, it does make a difference with certain lenders. Teaming up to buy with family or friends is always an option, or if you’re a key worker there will be certain government shared equity schemes available to you (HomeBuy, for example).
The government have recently announced measures to help first-time buyers. These include five year loans of up to 30% of the property’s value which would help greatly in getting a mortgage for the remainder. Like any loan you will have to pay it back, but it will be a much cheaper form of borrowing than with a mortgage company. Remember also that there is no stamp duty payable on properties under £175,000 for the next 12 months.
If you’re coming off a fixed rate deal and are in the market for a remortgage then you must start looking early – around three months in advance. Good products are often swamped with applicants, slowing the process down and often prompting the bank to take the product off the market. Make sure you use a good mortgage broker with whole of the market access. A good broker will have access to the best deals and will know which ones to right off because of high set-up fees.
It sounds obvious but the more equity you have in the property, the better deal you’ll get when you come to remortgage. This is where any overpayments (if possible) before making the move, will pay dividends. The best offers are only available to people who own at least 25% of their property. As with anyone applying for a loan, make sure your credit record is as good as it can be.
If you’re in the market for a buy-to-let mortgage, you may have problems convincing the lender to give you one. A lot of landlords are struggling to fill their rental properties at the moment with a glut of rental property around, especially in the case of new-build city centre flats. You’ll need a deposit of at least 25% and arrangement fees are typically higher than for owner-occupiers. Lenders will look for rents that cover 120-130% of the mortgage to act as a buffer and to fund maintenance. However, in a falling market, this could potentially be the time to pick up a buy-to-let bargain. Especially when the industry experts believe that rents will increase over the next few years with fewer people being able to a buy a home.
As the purchaser of a buy-to-let property you have a lot of homework to do. Not only do you have to check the small print on the mortgage paperwork, there will be a tenancy agreement to sort out and, in all probability, the letting agent contract. Watch out for hidden fees in all three. If there have been problems with your credit in the past it may be worth waiting for a while until you take on such a financially ambitious project, as negative aspects, such as CCJs, stay on your credit file for six years.