When it comes to applying for a mortgage and your credit score, the fewer addresses you have on your record the better, however it seems that people are becoming savvier and aware of this.
We are now seeing more and more applicants who have moved out of their parents address into rented accommodation but think that it is a good idea to leave their bank statements, credit card and Electoral Roll information registered at their previous address.
There are good reasons why people do this, however, I’m afraid this is now a flawed strategy. Almost without fail, if you have moved to a new address, there will be some record of this on your credit report. This could be from a delivery address when you have ordered something online or a car/home insurance search and many more.
By far a better strategy for you if you are thinking about taking out a mortgage is to get all of your accounts (credit cards / current accounts) and electoral roll changed over to your new address. When updating your address on your credit file and electoral roll ensure you double check the date in and date out. If you do make a mistake with these dates it can appear that you are living in two places at the same time. This is a more open and honest way of trying to apply for a mortgage.
Speaking to a Specialist Mortgage Advisor in Halifax would benefit you in many ways. Firstly, a Mortgage Broker like Halifaxmoneyman will tell you exactly how to improve your chances in getting accepted for a mortgage and help you complete these simple steps if you need guidance. They will go above and beyond for you, trying to find you that perfect mortgage deal that best suits you and your personal and financial situation.
Here at Halifaxmoneyman, we also offer a free mortgage consultation and you can get in touch with us 7 days a week from 8am – 10pm! We work for you, trying to provide the best mortgage experience we can; we hope that we hear from you soon!
So, you’ve saved up for your deposit (or got the green light from “Bank of Mum and Dad”) and made the decision to move home. What’s the next step? Put simply, and in the best boy scout traditions, it’s time to get prepared.
I’d recommend speaking to an experienced local Mortgage Broker in Halifax as early on in the process as possible, so you know how much you can borrow for a mortgage and how much it will all cost. Obtaining an up to date credit report should also be at the top of your list, you don’t want a meaningless squabble with your mobile phone provider holding you back from buying a home. Taking the above two steps will give you a meaningful expectation of how possible this is going to be and what your budget is.
Your Mortgage Broker in Halifax will obtain a fully credit-checked Agreement in Principle on your behalf but you’ll have to prove who you are, where you live and how much you earn. There really is loads of paperwork for you to get together so it’s a good idea to open a file for yourself and start collecting everything in advance.
In terms of proving who you are you’ll need to produce some photo ID such as a Driving license or passport, if you’re a non-UK national working over here on a Visa you’ll need that too.
In addition to the above, you’ll need to prove where you live. You’ll need to produce a utility bill or original bank statement dated within the last 3 months.
The analysis of your spending habits has become one of the most important determining factors in whether you’ll qualify for a mortgage or not. Your bank statements should evidence your income and regular expenditures. Lenders will not be happy to see gambling transactions on your account. Nor will they like it if you go over an agreed overdraft limit or if your direct debits bounce regularly.
You will have to prove you have the funds in place for the deposit and also evidence this for anti-money laundering purposes. Try not to move monies around your various accounts too much as it will make evidencing the audit trail more difficult. Lenders like to see your savings building up so you’ll need to account for any large credits into your accounts.
Quite often money for deposits has been gifted by family members. These funds need to be evidenced also and the “donor” will need to sign a letter. This is to confirm it’s a non-refundable gift, not a loan.
In terms of affordability, the most important thing is to be able to prove your income. If you are employed this tends to be by way of your last 3 months’ payslips and most recent P60. Lenders can take into account regular overtime, commission, shift allowance and bonus.
If you are Self Employed then you’ll need your Accountant’s help. This will be to request your last 2 or 3 years’ SA302 documents from the Revenue. Following that, they will get the accompanying tax year overview.
It’s a good idea to do your homework. Write down an estimate of your anticipated 1outgoings after you move house. You can work out an idea of how much the council tax and utility bills will be. In addition to that, you can work out your regular expenditures, such as food and drink. This will demonstrate how much disposable income you have available to pay your mortgage from.
As you can see from the above, it’s a real paper trail when you are applying for a mortgage but if you want your application to run like clockwork you’ll need to put the time aside to get everything together.
My own view is that it’s better to get all this at the outset and collate everything that the lender could possibly ask for. As this saves time and frustration later down the line if you’re subsequently asked for paperwork you could have had ready at the outset.
When you start out looking for a mortgage you will soon realise that there are lots of different options available. If you are a First Time Buyer in Halifax, you will probably be shocked to how many there are.
Below you will see a list of the most popular types of mortgages available on the market and hopefully. If you have any questions regarding any of the below mortgage options, then please do not hesitate to contact us.
A fixed rate mortgage means that your mortgage payments are going to stay the same for a set period of time. You can set the length of which you want to fix your payments for, typically this being 2, 3 or 5 years or longer. No matter what happens to inflation, interest rates or the economy you know that your mortgage payment, usually your biggest outgoing, will not change.
A tracker mortgage means that your interest rate will track the Bank of England’s base rate. So in other words, the lender that you are with does not actually set the rate themselves. You will be paying a percentage above the Bank of England base rate. In an example, if the base rate is 1% and you are tracking at 1% above base rate, that means you will be paying a rate of 2%.
When you take out a repayment mortgage this means that each month you are paying capital and interest combined. So as long as you keep your payments going for the full length of the mortgage term, the mortgage balance is guaranteed to be paid off at the end and the property becomes yours.
This is the most risk-free way to pay your capital back to the lender, in the early years it is mainly the interest that you are paying and your balance will reduce very slowly especially if you have taken out a 25, 30 or 35-year term. This situation switches in the last ten years or so of your mortgage, where your payments are paying off more capital than interest and the balance will come down much faster.
Whilst many buy to let mortgages are set up on an interest-only basis, it is much more difficult to get a residential property on an interest-only basis.
It is much less likely for lenders to offer an interest only product now. However, there are certain circumstances where this can be an option. These include downsizing when you are older or have other investments what you will use to pay the capital back. Lenders are very strict when it comes to offering these products now and the loan to values are a lot lower than back in the day.
With an offset mortgage, the lender will set you up a savings account to go alongside your mortgage account. How this works is that let’s say you have a mortgage balance of £100,000 and £20,000 is deposited into your savings account, you only pay interest on the difference, so in this case £80,000. This can be a very efficient way of managing your money, especially if you are a higher rate taxpayer.
More and more people these days pay much closer attention to their credit rating. Consumer awareness of credit scoring is higher now than ever before. I’d say at least half of the people who contact us for the first time, have already looked at their credit report online.
There are many different credit reference agencies out there. Most people will have heard of Experian or Equifax, but the free trial we recommend potential new clients take is with Check My File. This is because of this report “sweeps” several of those reference agencies and collates the information into an easily understandable colour-coded report.
Often, clients ask if we will be doing a credit search on them, because they are aware that too many searches can have an adverse effect on their credit score. Lenders always run credit checks but we always seek a client’s permission before doing so. There are 2 different types of credit searches that Banks can run on a customer: hard searches or soft ones.
A hard credit search is an in-depth look at your credit report. Any financial institution carrying out one of these should seek your permission to do so. The advantage of a “hard” search is the lender is looking into your situation quite closely. If you pass the credit score then it’s fairly likely that your application will ultimately be successful. The only thing that can really go wrong from then on, is if for some reason you cannot provide satisfactory documentation to back up the information you have disclosed. Either that, or it turns out you have provided false details.
The bad news about a hard search though is that it leaves a “footprint” on your credit file. This means anyone who looks at your report in the future can see you have had a search carried out. This isn’t necessarily a bad thing, but if you have several footprints registered in a short period of time then it could look like you applying for lots of credit at the same time.
The footprint does not state whether your application was successful or not. However, if you have several searches over a few weeks, then lenders’ systems could wrongly assume you are being declined on the basis of; “Why else would you go to lender number 2 unless lender number 1 had said no?”.
The odd hard footprint on your record from time to time is no big deal. There’s no need to worry too much about this, just be careful not to have too many.
A soft credit search is a “lighter touch” look at your financial situation. This is the kind of search that would routinely be carried out on price comparison websites. This would give you an indication of what products might be available to you. It can also be useful if someone wants to verify your identity.
Some mortgage lenders do soft searches in the first instance. More and more lenders seem to be changing to doing this type of search. Whilst the financial institution doing a soft search obtains less information about you than if they had done a hard search, an Agreement in Principle from one of these lenders is usually still an extremely strong signal that your full application will be accepted.
You will be able to see that someone has carried out a soft search on you if you check your credit file. The good news though, is that these searches are not visible to other Financial institutions like Banks. This means that you can apply for an Agreement in Principle for a mortgage, without it damaging your credit score. This is irrespective of whether it is successful or not.
Many schools now only offer Newly Qualified Teachers (NQT’s) a 12-month initial contract as standard. This can prove a problem for many Teachers if they want to buy a property because most of the High Street Mortgage lenders will class them as a “Contract Worker” and as such will require you to have 12 months in the role.
Fortunately, some smaller lenders are more sympathetic to this situation and will consider an application without the 12-month history. Some of the key things that can be considered are as follows:
If you are a newly qualified teacher and would like to discuss your mortgage options then please don’t hesitate to contact us.