Is your dream of home ownership still stuck on the ground? Here are our top mortgage tips to help it take flight. Article by Nick Green.
Getting onto the property ladder isn't easy, even at the best of times. Not only do you have to save up a large deposit, but you also have to convince a mortgage lender that you're a safe lending prospect. It's this second challenge that can feel the most daunting.
Esme (28) is a first-time buyer. ‘I really want to get on the property ladder before I’m thirty. The trouble is, it doesn’t even feel like a ladder anymore. As a first-time buyer, everything is so stacked against me that buying a home seems completely out of reach. Renting is so expensive it’s hard to save up a deposit, and mortgage companies ask you so many tough questions and then offer a really poor deal if you don’t meet their standards. It does feel like being nailed down.’
So it’s no longer a property ladder – now buying a home seems as hard as lifting a house with balloons, like in the film ‘Up’. Impossible? Not at all! Here’s how you do it.
Getting your home-buying dreams off the ground
Okay, Esme. To get off the ground you need to do two things. Firstly, decrease your load. Secondly, increase your lift.
What stops you getting a mortgage?
No single factor will necessarily prevent your mortgage application from succeeding, but multiple negative factors will add up. If there are too many problems with your application, these will act like a heavy load, dragging you down.
Your ‘load’ is everything that might cause concern to a mortgage provider. These include liabilities such as:
- existing debts
- unused or forgotten credit cards
- question marks on your credit file (you need a strong history of borrowing and repaying)
- other addresses
- financial ties with other people who have poor credit ratings
- not being on the electoral role.
Identify all this ballast and ditch it now.
What do you need to get a mortgage?
Having got rid of your excess ballast, you now need to look for things that will boost your mortgage application. Your ‘lift’ is everything positive you can do to reassure your mortgage provider that you are a safe prospect and will repay the loan. This includes the size of your deposit, but also how much extra you can squeeze out of your income.
- Calculate your current outgoings and see where these can be reduced.
- Draw up detailed spending plans so you know exactly how much you can afford in monthly mortgage repayments, and can prove it.
- If you expect to buy in a few years’ time, try and make the most of a Lifetime ISA (LISA). A LISA pays you a bonus of 25 per cent on everything you save, and you can save up to £4,000 per year (with a bonus of £1,000 annually). A LISA is currently the best way to save up your deposit.
Note: The LISA effectively replaces the Help to Buy ISA, which won't be available for new savers after November 2019, though existing savers can continue to claim their bonus until 1 December 2030.
- See if there are any other Help-to-Buy schemes from which you can benefit.
- Finally, seek advice from an independent mortgage broker who can find you the best deal from across the whole of the market. This can save you thousands in the long term.
What credit score do you need for a mortgage?
There is no minumum credit score required for getting a mortgage, though obviously higher is better. Credit ratings agencies may also use different criteria from mortgage lenders, so it is always worth trying. However, there is one important warning to bear in mind.
Every time you apply for a mortgage, the provider will usually run a hard credit check on you, and this check will appear on your credit file. A large number of credit checks on your file can actually reduce your credit score, making the next application harder. For this reason, it's advisable not to apply for a mortgage until you are fairly confident that you will be accepted first time. Our last tip today will help you maximise your chances of this.
One more tip to help you get accepted for a mortgage
Our final tip is one of the best. You can test the strength of your mortgage application before you approach any providers, using the Unbiased Mortgage Checklist tool. This will give you a calculated estimate of how close you are to having your mortgage approved. It's better than going straight to a provider, because it doesn't run a credit check on you, and so won't harm your credit file.
Like 80 per cent of people who seek advice on their mortgage application, Esme has her mortgage approved first time and is up, up and away!
You can book a free consultation with a mortgage adviser today.