To get your mortgage ready, you should also start getting your credit file in good shape, this can be for a remortgage or a new purchase. Here are some tips:
- Obtain a copy of your credit report
- Set Your goals realistically
- Create a budget on how much you can borrow
- Work on paying off your existing debt
- Avoid applying for new credit before you apply for a new mortgage
- Check Your Credit report regularly
- Pay your bills on time
With all the challenges and disruptions we have all had to face in recent months, who knew that a pandemic on a global scale could affect us all in some way, be it financially due to a job loss, reduction in our weekly hours or maybe illness – this can affect all of our long term plans, but there are steps that can be taken to get yourself back on the road and be financially sound again.
Obtaining a copy of your credit report
There are two major companies that provide this information and they are Experian & Equifax. There are other companies who do provide this service and a quick google search will allow you to find them, there is a fee for this service. There is also a company called Check my file, which allows you to search both Equifax and Experian, and other agencies all at the same time, so provides a more comprehensive search and you will be able to see what the lenders are going to look at when checking for your creditworthiness. Try to make your bill payments on time because this can seriously affect your credit score and check to see if they have the correct information about you and your finances. Check your credit report regularly and also ensure that you are on the electoral roll at your current address.
Will a payment holiday affect my suitability for a Mortgage/Re-Mortgage?
If you’ve taken a mortgage payment holiday, you should have been told by your lender that this will not affect your credit rating, this is providing the holiday was agreed with your mortgage lender and you have stuck to the terms of the agreement that had been put in place. Your lender should have put all the information in writing to you, so you will have a record of this when you need to apply for your next mortgage.
The Financial Conduct Authority extended this payment holiday in May 2020, up until the end of October 2020. If you have not yet applied for a payment holiday – think carefully before you do so, is it really necessary; are you able to make the repayments and only request this if you really are not going to be able to keep up with the repayments that should be made, lenders will take this into account when they assess your affordability, If you have not taken a holiday, whilst on furlough, this will be more favourable to your application. However, once you are earning again it is important to prioritise paying this off as much as you can. If you have reduced or totally repaid the outstanding balances as soon as you were able, it will help your case when you apply for a mortgage.
The reason for this is the money you owe in terms of the capital you have initially borrowed and the interest will still accrue during the period of your payment holiday, and will still need to be repaid at some point in time. This may increase your monthly mortgage payments slightly, the longer you haven’t made your normal monthly payments, the more interest you will end up paying overall, especially if you have taken the payment holiday from when it was first announced and have taken an extended holiday up until the end of the scheme in October, this may affect your chances of obtaining a new mortgage at this point in time.
Set Your Goals Realistically
Mortgage lenders will carefully consider your spending and saving patterns as part of the mortgage application. This includes any existing debt and how you manage it; part of this involves reviewing how much debt you may have and how you manage it, this involves looking that you keep up the repayments, try not to miss payments and try not to make late payments, as this can affect your mortgage application. All hope is not lost though, there are specialist lenders who can help, so your current circumstances may not always go against you, understandably the current climate is challenging, at the Money Hub Limited, we specialise in dealing with credit issues that may not be the “norm”. Call our Specialist Mortgage Advisors at The Money Hub Limited on 0203 725 5830, to discuss your mortgage requirements.
Create a Budget
If you are regularly using your overdraft and only making minimum repayments on credit cards instead of reducing your debt, this can affect your application with lenders and demonstrate that you are living outside of your means. Having an outstanding balance on your credit card that you are unable to reduce can be seen as another problem, i.e. that you are not in control of your finances. Do you have gym memberships that you are not using? consider your budget, how much you are likely to spend and how much you are likely to need; clear out and pay off small items that you do not really need or are not using to their full potential – of course, these things would be understandable if you are suffering or have suffered financially from the impact of COVID-19 in any way, the best thing to do would be to contact a specialist mortgage advisor at The Money Hub Limited on 0203 725 5830, who will assess your chances of obtaining a mortgage or remortgage with your current circumstances.
Avoid Obtaining New Credit when applying for a Mortgage or Remortgage
This can especially affect your chances of borrowing, either for a remortgage or a new mortgage, the lender will assess your affordability, if you are looking to take out further credit for a new car, payday loan, loan or credit card, think that this may affect my affordability in the short term, most lenders will only lend what they deem to be affordable to your circumstances and do not look favourably at taking out payday lending, this is seen that you are not able to manage your finances and spending beyond your means.
What will we need to make an application for a Mortgage?
You will need:
- Copy of current credit report for all applicants
- Payslips for the last three months
- P60 for the current year
- Proof of Identity in the form of a UK Passport and/or Driving Licence (this must be in date)
- Bank Statements dated in the last three months
- Proof of Residence by providing either Utility Bills (dated in the last three months) i.e. Electricity, Gas, Water, Landline Telephone bill or Council Tax bill (current)
If you have not lived at your current address for more than 3 years, the lender may ask for further information
- Self-employed applicants may be asked for the last two/three years of SA302s as well as other documentation to support their application, this may include any accounts that you hold.
This list is not exhaustive and further information may be requested, this is dependent on the lender’s assessment of your specific application.
How to explore your mortgage options with The Money Hub
Call Money Hub Limited on 0203 725 5830 and speak to one of our highly specialised and dedicated Mortgage Advisors or you can complete an enquiry form which will allow you to schedule a call time.
DISCLAIMER: These articles are for information only and should not be construed as advice. You should always seek advice prior to taking any action.