22 July 2020

How to improve your chances of getting a mortgage

Despite the welcome stamp duty holiday introduced by the Chancellor to boost the housing market and wider economy, it is well documented that the pandemic has made it harder to get a mortgage.

For those borrowers fortunate enough to have substantial equity (at least 20 per cent of the purchase price), with little or no requirement for bonuses to enhance borrowing, and who are PAYE, then the process of getting a mortgage should not be too complicated. Admittedly, it may not happen as quickly as it would have done pre-pandemic as service and turnaround times have suffered as a result, so you will have to allow longer for the deal to be completed.

Unfortunately, those with small deposits, complex incomes, and who are self-employed, will find that the process has become much more difficult. There are fewer products available at high loan-to-values (LTVs) and those that are around may serve a defined segment of the market, such as first-time buyers, or be very difficult to access. Additionally, those in receipt of variable elements of their income, such as bonuses, commission and overtime, may find that lenders are not allowing these to be included, or at best only a reduced amount. Finally, should the applicant be self-employed, there will be greater scrutiny of their accounts and the lender will be looking for evidence that the business will continue to be a going concern.

The big high-street lenders continue to chase the low-hanging fruit, offering the best deals to the best applicants. Smaller lenders, including some building societies and specialist providers, are attempting to cater for the under-served market of borrowers looking for high LTVs or family-assisted products but given their limited scale, they cannot help everyone.

However, all is not necessarily lost. Borrowers can help themselves by getting their own finances in order before they even think about applying for a mortgage. Reducing your debt and paying off expensive credit cards and overdrafts, as well as checking your credit rating to ensure all is as it should be, is an important first step. Pull all your paperwork together, including personal and if relevant business accounts, and an accountant’s reference is also advisable if you are self-employed. If you are selling a property as well as buying one, make sure your home is on the market.

The housing and mortgage markets are very active and fluid so above all, be prepared to act quickly. And with the mortgage market trickier than it has been in a while, it is more important than ever to consult a mortgage broker such as ourselves, to ensure you get the best deal possible for your circumstances.

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