In part 1, Talis IFA looked at some key facts about mortgages, and how working with an independent financial adviser could help you.
The media has been full of stories of people spending hours on the phone trying to secure a mortgage while the market changes around them. An IFA can help remove a lot of that frustration, as they often have good relationships in place with a range of lenders, and can get hold of people more easily.
That’s all very well, but with lenders pulling deals at short notice, how do you get access to a mortgage deal in the first place?
It’s true that lenders have pulled deals without warning, then reinstated them, before shutting them down again, whilst frustrated would-be borrowers jam phone lines to try to get information.
However it’s important to understand the process that’s at work here. If you’ve actually reached the stage of having a mortgage offer, it’s highly unlikely that this will be withdrawn. Where problems are more likely to occur is at the initial application stage, or where you have only an ‘agreement in principle’ (AIP – also sometimes known as a ‘decision in principle’).
If you’re at AIP stage, it doesn’t mean that a lender has committed to a mortgage, simply that they have assessed you as a potential borrower and are ‘in principle’ prepared to loan you a stated amount of money at a particular rate. There’s no contract at this point, and the offer could be adjusted or withdrawn completely if circumstances change.
AIPs also carry an expiry date, so you need to make sure you’re aware of this and (if house hunting) get on with finding a property and completing your full application in order to reserve the mortgage product.
Be prepared – one way to ease your way through the mortgage maze
It might surprise you to know that there isn’t really a standardised set of requirements across mortgage lenders. Some take different attitudes towards leasehold properties, for example. But in general, if you’re making a mortgage application, there is information that you’ll need, and it’s worth gathering some key documents before you start.
One of the first things you’ll be asked to demonstrate is that you can afford the loan you’re asking for.
Lenders are increasingly looking at how able you are to afford repayments based on both your income and outgoings, rather than a simple calculation based on multiples of income. They’ll want to see:
- Proof of income. The minimum requirement is usually three months’ payslips, plus bonus payslips if this is an affordability factor (the last two years’ bonus information if paid annually, last four payslips if quarterly and last three payslips if monthly)
- Proof of outgoings. The last three months’ bank statements (from the salary-fed account) are likely to be essential, and a copy of your credit report can be very useful
Whether you’re buying a new property or remortgaging your current home, you’ll also need to be prepared to provide details of the property, and it helps to discuss the type of property with your IFA before they begin a search for a mortgage for you.
Lenders’ attitudes towards different types of property can differ significantly – for example you might find it difficult to obtain a mortgage on a leasehold property with a short lease and no option to extend, a property of non-traditional construction (beware here – ‘non-traditional’ commonly means ‘not built from bricks and mortar with a tiled roof – so your charming, (and highly traditional) oak-beamed, thatched cottage could fall foul as could your innovative, environmentally friendly ‘grand design’!), or an ex-local authority property.
Talking to your IFA at an early stage about the type of property you plan to buy can help to avoid wasting time chasing down mortgage deals from lenders who won’t entertain it, reduce your frustration levels and make it more likely you’ll be ready to proceed when you need to.
Make sure you find out as much as you can about your dream property, as early as possible – how many years are left on the lease (if leasehold), what’s its construction, are there any unusual factors (flying freeholds, rights of way over land, and previous uses of the building are just a few examples) which might limit the number of lenders prepared to consider you for a loan?
Ultimately, the right mortgage deal is a very personal thing, and we can’t promise that sorting it out right now will be simple. Talis IFA is known for giving honest, transparent advice, and with the market as it is right now, we also can’t promise that there will be no ups and downs along the way. But what we can assure you is that we’re committed to helping our clients secure the best options for them long-term, and being completely independent gives us access to the broadest possible range of options. Talking to us at the earliest possible opportunity will help you to understand your options, and to prepare so that you’re in the best possible position to secure a deal.
If you’re frustrated by trying to find a mortgage right now, or are planning for a remortgage or move in a few months, get in touch. Click here to find a Talis IFA.