More than a decade of low interest rates may have lulled some of us into a sense of false security, but current mortgage lenders are starting to ask some tough questions. Following on from guidelines set by the Financial Conduct Authority, borrowers will have to prove that they not only have the resources necessary to manage repayments at today’s prices, but will also be able to make them as rates go up. With this in mind, here are ten strategies that will ensure that your trip to the bank is a fruitful one.
Unless you’ve been living in a remote lighthouse for the past ten years, you’re very likely to have accrued a credit score. There are several online resources that provide a checking service and they’ll be able to alert you to any snags in your money history, like late loan repayments or overdue bills.
Don’t just settle for the minimum deposit on a home. Going for this option will result in higher rates, so it’s wise to gather as much liquidity as you can. A 40% deposit is the best way to ensure that your mortgage repayments stay manageable, although many lenders are offering reasonable deals on a 10% stake.
Your presence on the electoral roll lets prospective lenders know that you’ve put down roots in London and can be relied on when it comes to shouldering the responsibilities that owning a home brings. They’re not necessarily looking for you to be politically engaged one way or the other; they’re just looking for signs of stability and permanence.
Mortgages come in many different flavours, so it pays to investigate the market in order to find one that most matches your requirements. Fixed rate deals remain popular as they ensure peace of mind and you don’t have to be a financial expert in order to understand how they operate. Variable arrangements that track the base rate are still available and these will require that you do quite a bit more homework.
Financial irresponsibility is a big minus point with most lenders and they will not look favorably on your application if you are consistently going into the red. Pay your bills promptly and avoid excessive overdraft situations as this will show up on your credit score. Of course, unforeseen expenses may occur, like a broken boiler or emergency dental bills, but frittering away money is not the best way to impress.
Apart from helping you with the above, a simple database that shows your monthly outgoings will enable the lender to get an accurate picture of what you have to live off after bills, rent and travel. The fact that you have this data readily at hand will make it easier for your application to go through.
Bank statements are still the preferred way by which lenders can gauge the stability of your finances. It’s best to provide information on paper going back three to six months.
Your credit score might receive a serious dent if you tend to max out your credit cards. Put those major shopping expeditions on hold for a bit as you apply for your mortgage. Christmas is a time in which many of us get carried away, but look at the big picture.
High interest loans with big monthly repayments will set alarm bells ringing with your prospective lender. If you have some, then it’s best to renegotiate terms and get them down to reasonable levels in order to protect your credit score.
Sky diving over a tropical island might seem like the adventure of a lifetime and look incredible on social media, but your average mortgage lender will only be interested in how much you spent and how much you subsequently owe. To put it bluntly – banks like being bored and keeping a lid on your disposable income outlay is a good way to convince them that you’re worth the risk.
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