Getting a mortgage for a piece of property in this day and age is indeed a lot more challenging than before, thanks to the changes in the property and economic climate and the demand for mortgages (as well as other important factors). So if you are planning to apply for a mortgage and you are a first-time applicant, you need to know what you can expect and what changes may affect your application today.
The most important fact that you should remember, though, is that the amount that you might be able to get for your mortgage will greatly depend on both the amount of deposit you have as well as your actual income.
What Lenders Do Today
In the past, lenders simply multiplied your actual income by approximately five times in order to figure out the maximum amount of mortgage you could borrow. Nowadays, however, things have changed. The system of computation used by lenders is quite a bit more complex, because lenders have to also check and assess the mortgage’s affordability for you – simply put, whether or not you are able to afford the mortgage repayments.
But it really doesn’t end there, either. There are now new mortgage regulations and rules as well (which became official as of April 2014), and lenders are obligated to abide by these rules and guidelines. For instance, under new regulations, lenders are now obligated to check not only if you can afford to pay back the mortgage itself, but also if you are able to afford your repayments if the interest rates become higher by as much as 6 to 7 percent.
The More Complex System of Interviews
Apart from more complex calculations on the affordability of the mortgage for the borrower, you also have to contend with interviews that are a bit more difficult as well. Normally, you could expect such questions as ‘How much do you earn?’ and ‘What bills do you pay and how much are they?’ and ‘How much debt do you owe?’ But once again, things have changed. There are some prospective borrowers who have had to go through hour-long interviews where all aspects of their earnings and expenses are assessed. Although you may not be asked such details in your interview, it is still best to be prepared. This comes with knowing what to say if you are asked about your committed expenses, such as insurance, gym membership, vehicle costs, weekly grocery expenses, school expenses and fees, childcare fees, and even expenses for eating out.
What you can do is make it relatively easy on the lender. What this means is that you can keep an eye on your spending for at least three months prior to the time you apply, as most lenders will assess your spending habits during this three-month period. So if you are planning to apply, keep your expenses down and live within your budget for at least the three-month period. Also, try to save as much as possible for your deposit, as this can result in less inquiry and scrutiny as well.
When it comes to mortgage applications, it always makes a difference if you have a good mortgage broker to give you the proper guidance and advice you need. Mortgage broker Colchester experts like Flagstone are ready and willing to give you the right mortgage advice so you can benefit from the best mortgage deal available.