Getting the best mortgage deal is never easy. However, by following these steps, you can begin to get your self mortgage ready. Most mortgage lenders are presently working to reduced capacity. There are fewer than half the mortgage deals available now than that at the beginning of the year, according to Moneyfacts. People with 5%-10% deposits are being turned away by many lenders amid fears of negative equity due to the potential impact of the pandemic on house prices.
Before you apply for a mortgage, follow these top tips to give yourself the opportunity of getting the best mortgage deal for you. Remember, the lowest rate is not always the best overall deal for you.
1. As a first-time buyer, build that deposit to ensure the best mortgage deal.
There are very few 95% mortgages available which is proving an issue for many first-time buyers. Many mortgage deals for 90% last for just a few days and often come with restrictions like not lending to new build properties or flats.
If you can get together enough for a 15% deposit, you will find lower rates and a wide choice.
2. Make sure that you can prove that you can afford that mortgage.
The mortgage lender will need to check that you can afford the repayments on your new loan. You will need to show the lender your income and expenditure to be able to prove that you can comfortably afford the repayments. Keep your outgoings as low as possible.
Lenders will look at your bank statements for signs that you might be struggling with debt. Avoid using your overdraft, pay off or bring down any credit or store card balances. Above all, avoid payday loans, county court judgements and gambling transactions.
3. Start improving your credit score.
Check your credit score. The score rates your financial behaviour and your history of keeping up with your loan and utility payments. There are three major players in this market being, Equifax, Experian and TransUnion. You record with each can be different so, it is worth checking out all three. The good news that you can do this for free. Here is a link to our website to get a free report from Experian to get you started.
Follow these top tips to improve your credit score-
- Register to vote on the electoral register.
- Make sure that your name and address is correct with all your credit providers.
- Pay your bills on time.
- If you do not have a credit card, take one out and use it monthly, but make sure you pay the bill off in full. Lenders like to see that you can manage your finances.
Remember that it takes a long time to build up a good credit score but a short time to lose it.
4. Sort out your paperwork.
Start getting your paperwork ready. You would not want to lose out on a great deal because you are missing a payslip. You should have-
- Two forms of ID like a current passport and a driving license
- Six months of consecutive bank statements.
- Six months of consecutive payslips.
- If bonuses and overtime, make up a regular part of your income, then you will need to show this with your P60.
If you are self-employed, you are likely to need your tax return and last two years accounts. Lenders are also asking for current bank statements to see if your income has remained stable through the pandemic. If you can, tell your accountant that you will be applying for a mortgage, at least two years before. It will help them to show your income in the most favourable light.
5. Use a mortgage broker to get the best mortgage deal.
With few mortgages available and lenders constantly changing their criteria, never has there been more of a need to work with an independent mortgage broker like us. We can search the market for the best mortgage deal for you and highlight lenders that are more likely to approve your application. Brokers also get access to mortgage rates that are not widely available and get notified of any short-term deals for people with low deposits.
6. Get government help with that deposit.
First-time buyers under the age of 40 can save up to £4,000 a year in a Lifetime ISA (LISA). You will then get a 25% top-up from the government when you use the money towards a home costing, no more than £450,000. The LISA needs to be open for at least 12 months before buying.
Other government Help to Buy schemes are available but changing. With a Help to Buy: Equity Loan, the government lends you up to 20% of the house value, interest-free over five years. You will, however, need a 5% deposit. From the 16th December 2020, the scheme is only open to first-time buyers who are buying a new-build home. Other scheme’s, maybe announced, so talk to us to find out which is best for you.
7. Take care if remortgaging.
If you are looking to remortgage take care if you have lost out on bonuses or have had to take a pay cut. You may struggle to meet the affordability checks when remortgaging with a new lender. However, you may still be able to switch to a new deal with your current lender, provided you are not looking to borrow any more. You mortgage broker will be able to advise you.
How Anstee & Co can help you get the best mortgage deal.
We are a firm of Independent Mortgage Brokers. This means that the mortgage advice we give is unbiased. We will look at all the options available to you to get you the best mortgage deal. We would welcome the opportunity to have a coffee with you and discuss how we can provide you with the advice and help you require. Why not contact us today?
- Kettering, Northamptonshire
- Stamford, Lincolnshire
- Towcester, Northamptonshire
- London, Greater London
Due to the present government guidelines regarding COVID-19 (coronavirus) and social distancing we are making full use of video conferencing facilities such as: –
- Microsoft Teams
We can also arrange a conference telephone call. There is no need to visit an office as all work can be handled remotely. Meetings can be arranged at a time and in a way that is convenient for you.
If you have any thoughts or comments on this article, “7 steps to getting the best mortgage deal.”, then we would love to hear from you.
Finally, the information contained in this article is for information purposes only and does not constitute financial advice. No action should be taken based on this information alone. Anstee & Co. is authorised and regulated by the Financial Conduct Authority (FCA).