Mortgage FAQs
How much can I afford?
1. Who do I need to speak to about getting a mortgage?
2. How much deposit do I need?
3. Is there any cost involved in arranging a mortgage?
4. Do I need to get my house valued first?
5. Can I get a mortgage online?
6. What is a good interest rate?
7. What is the different between variable and fixed interest rates?
8. How much do I need to earn to get a mortgage?
9. Can I add my legal and agency fees on to the mortgage?
10. Can I take out a personal loan to get a deposit?
11. Can my parents guarantee the mortgage?
12. Should I get a valuation on my house first?
Contact IFA/Lender/Mortgage advisor
1. What do I need to take to the meeting?
2. Do I need to take copies of my payslips?
3. Will they charge for their time?
4. I have a bad credit history, what are my options?
5. What questions will they ask me?
6. Do I need any references?
7. If I apply for a mortgage and it gets declined, will that go against my credit rating?
I don’t have enough deposit
1. I don’t have enough deposit, what are my options?
2. Does the government have any schemes?
3. Will the vendor pay towards my deposit?
4. How do I find more affordable deposits?
5. Should I look to rent for a few years?
6. How do I save more deposit?
There isn’t enough equity in my house
1. How do I increase the value of my house?
2. What are my options with no equity?
3. Can I add some of my savings?
Collect details
1. What details will the lender need?
2. How long will it take to get a decision?
3. What happens if I get the house valuation wrong?
Recommendation sent
1. Should I go with a fixed or variable rate?
2. When do I instruct them to do a survey?
3. What is a good interest rate?
4. How many years should I pay the mortgage over?
5. How do I proceed with the mortgage?
6. Should I borrow more to cover home improvements?
7. Do I need mortgage payment protection?
8. Who is responsible for my mortgage if I am ill?
A mortgage hasn’t been offered
1. Why have I not been offered a mortgage?
2. Is there anything I can do to change their decision?
3. Do I need to check my credit history?
Mortgage in principle
1. What does mortgage in principle mean?
2. Can it still be refused?
3. How long will it be valid for?
4. What documents will I receive?
5. Do I need to let the estate agent/solicitor know?
How much can I afford?
1. Who do I need to speak to about getting a mortgage?
There are various companies, both online and offline that provide information and quotes for your mortgage. We would recommend speaking with an independent mortgage broker, as they will search the whole market to find you the right mortgage for your specific circumstances.
2. How much deposit do I need?
This is dependent on your financial ability, and any savings you have. Usually this is around 15% of the property value, but mortgage restrictions in recent years have raised this figure in some cases up to 25%.
3. Is there any cost involved in arranging a mortgage?
Some brokers will set you up with a mortgage without charging a fee. If you go to the lender directly then there is often an arrangement fee, which is typically £100-£500.
4. Do I need to get my house valued first?
Although this is not a necessity, we strongly advise that you do receive a house valuation before arranging your mortgage. This provides you with the value of your home, which in turns gives you an indication on what you can afford next.
5. Can I get a mortgage online?
There are online brokers available for you to arrange a mortgage through. It is likely that you will need to meet with an independent financial advisor though, as they can provide a more detailed breakdown of your buying ability.
6. What is a good interest rate?
Tracker mortgages tend to come with the best deals, but these are more appropriate for those who can afford bigger bills when interest rates rise. The best rates for five year deals are around 4% to 4.5%, with the best two year rates under 3%.
7. What is the different between variable and fixed interest rates?
A fixed rate means that you know exactly how much you have to pay back each month. The drawback is that you are tied into the contract, and you may face a penalty should you wish to move to a different package with a better rate. A variable rate is more suitable for those who can cope with changing market conditions and interest rates. These types of home mortgages may be appealing originally, but they run the risk of increased interest rate rises in the future.
8. How much do I need to earn to get a mortgage?
This is relative to the cost of the house you are looking to purchase. Mortgage lenders currently work off the 35% of income rule. This means that they will assess whether 35% of your monthly income is sufficient to cover your mortgage repayments.
9. Can I add my legal and agency fees on to the mortgage?
Due to the nature of property transactions there are a number of different parties working fairly independently on your sale or purchase. Although the agent may be in contact with the solicitor, and vice versa, they will not be working side by side and you will be required to pay them separately. For this reason, the solicitor and agent will want to receive payment and not have this cost tied up in the mortgage.
10. Can I take out a personal loan to get a deposit?
We strongly recommend that you speak with a financial advisor before considering this route. A personal loan may result in unmanageable debt, jeopardizing your chances of securing your new home. An independent financial advisor will be able to advise you of your current financial ability.
11. Can my parents guarantee the mortgage?
Your parents may be able to guarantee your mortgage, but this will be dependent on your lender and their specific criteria. Mortgage lending does fall under strict qualification and it would be useful to speak to an independent financial advisor about this. They will be able to provide more information on whether your parents can help you with your mortgage.
12. Should I get a valuation on my house first?
Although it is not essential to do so, we recommend that you do have a full valuation performed on your house as early as possible. In doing this before mortgage discussions you have much more information to support you. It will also help your mortgage lender and financial advisor when they calculate how much you are eligible to borrow.
Contact IFA/Lender/Mortgage advisor
1. What do I need to take to the meeting?
There are a number of documents that the financial advisor or lender will want to see, to clarify your current position. To arrange your mortgage you will probably be required to provide the following documents:
- Proof of I.D. (driving license or passport)
- Three months of payslips or your P60
- Last mortgage statement (if you are re-mortgaging or are an existing homeowner)
- Credit card/debit cards
- Existing building/contents policy if applicable
2. Do I need to take copies of my payslips?
Your mortgage lender or advisor will want to see at least three months of payslips. This will help them to assess your current ability to buy and whether you are eligible for a mortgage.
3. Will they charge for their time?
The initial meeting with a financial advisor should not cost you anything. They will assess your situation and make recommendations on the mortgage options available to you.
4. I have a bad credit history, what are my options?
You do have some options but they depend on your specific circumstances. Speak with your independent financial advisor and they will talk you through your options.
5. What questions will they ask me?
During the meeting they will ask you about your financial situation, including what assets you own and whether you have any cash deposit available.
6. Do I need any references?
It is unlikely that you will need any references when meeting with a financial adviser. They will look at your previous bank statements, financial history and any outstanding debts to build up a financial profile for you.
7. If I apply for a mortgage and it gets declined, will that go against my credit rating?
Although the declined mortgage application does not appear on your credit rating, the fact that the lender performed a search will. Several of these searches will cause your credit rating to look suspect when future applications are made.
I don’t have enough deposit
1. I don’t have enough deposit, what are my options?
If you do not have a sufficient deposit to put towards a property then you will have to reconsider the purchase. Unless you can source the deposit by another means then it is likely you will miss out on the property. You can speak with an independent financial advisor, who will be able to give a more detailed breakdown of your options.
2. Does the government have any schemes?
There are schemes available to help you afford your next home. You may be able to get financial help from Government schemes such as ‘Homebuy Direct’, whereby you receive a loan for a deposit. Alternatively you could look into shared ownership opportunities, where you buy part of your home and pay rent on the remaining share.
3. Will the vendor pay towards my deposit?
This is not usually the cause but in rare circumstances the vendor will be so keen to sell the property that they will put money towards your deposit. You will be able to find out if this is possible through the selling agent. Some companies that sell chain-free properties will offer incentives such as deposits paid, so it is advisable to look into these also.
4. How do I find more affordable deposits?
You may need to consider looking for a less expensive house, as the property worth affects your mortgage which subsequently determines the required deposit. To alter the deposit you would need to either find a cheaper property or a mortgage which requires less initial payment.
5. Should I look to rent for a few years?
If you are currently unable to afford a deposit then you may want to consider renting a property. Speaking with a financial advisor will give you an indication whether this is the right route for you. Once you have an idea about your financial position you should go and meet with a local estate agent. They will be able to talk you through available property in your price range.
6. How do I save more deposit?
The first thing to do is to clearly work out your expenditure against your income, step by step. This will give you an idea about the essential things you are spending money on, and the areas that you could potentially cut to begin saving more deposit. Although the thought of not buying new clothes may not sound appealing, you should remember that the end goal is a deposit for a house.
There isn’t enough equity in my house
1. How do I increase the value of my house?
There are a number of home improvements you can complete to increase the value of your house. Consider whether the increased value of your property outweighs the cost of having the improvements done. It may also be that the housing market is generally seeing lower house prices. If this is the case then you may wish to put your plans to move on hold until the general market conditions have improved.
2. What are my options with no equity?
Unfortunately, this is a tricky situation if you are faced with no equity. Make sure that you firstly get an accurate valuation from an accredited estate agent. They will be able to judge whether you have any equity in your property. If they confirm that you haven’t any equity then you will be unable to move until you raise the necessary funds.
3. Can I add some of my savings?
You may be able to use some of your savings to pay off your mortgage, which in turn will release equity in your property. This is dependent on the arrangement you have with your lender. We recommend that you speak with your lender and an independent financial advisor to see if this route is available to you.
Collect details
1. What details will the lender need?
The mortgage lender or financial advisor will try and obtain as much information as possible to ascertain whether you are eligible for a mortgage. This will include all of your financial details, as they measure your incomings against outgoings and whether you can reasonably afford to take on mortgage payments.
2. How long will it take to get a decision?
Each lender will take a varying amount of time to process the mortgage application and make a decision. This could take anywhere from 3-5 days to 3-5 weeks and is just a matter of patience until a decision is reached.
3. What happens if I get the house valuation wrong?
We would always recommend that you get your house valuation carried out by an accredited estate agent. They will understand exactly what it takes to value a house and they will factor in factors such as local market conditions and comparable properties. This way, you don’t run the risk of a wrong valuation and this won’t hinder the mortgage application.
Recommendation sent
1. Should I go with a fixed or variable rate?
A fixed rate means that you know exactly how much you have to pay back each month. The drawback is that you are tied into the contract and you may face a penalty should you wish to move to a different package with a better rate. A variable rate is more suitable for those who can cope with changing market conditions and interest rates. These types of home mortgages may be appealing originally, but they run the risk of increased interest rate rises in the future.
2. When do I instruct them to do a survey?
The mortgage company are likely to arrange their own survey of the property. Please note that this is only a survey to determine whether the loan will be approved and won’t point out any structural defects. As your home purchase is going to be a significant financial outlay you may wish to commission a Homebuyer’s Report or a Building Survey.
3. What is a good interest rate?
This is impossible to judge without assessing your specific financial position and the property you wish to purchase. Speak with an independent financial advisor and they will provide a range of mortgage products that they feel are suitable for you.
4. How many years should I pay the mortgage over?
A financial advisor will be able to assist with this, as they will be able to find you the right mortgage product for your specific situation. This will include the right time period to spread the mortgage payments across.
5. How do I proceed with the mortgage?
If the mortgage lender has approved your loan then it is down to you to accept their offer. Speak with your mortgage lender and financial advisor and discuss whether it is the best option.
6. Should I borrow more to cover home improvements?
You should only borrow an amount you can comfortably afford to repay back. It is not recommended to overstretch yourself with excessive borrowing and you should speak with a financial advisor before you consider this as an option.
7. Do I need mortgage payment protection?
Mortgage payment protection will keep you covered in the event of accident, sickness or unemployment affecting your income. This is used by many to protect their home from repossession should any unfortunate circumstances fall upon them. It is not a legal necessity to take up this insurance, and it is completely your decision. It is worth considering your job security and whether you would be able to keep up mortgage payments should you lose your job.
8. Who is responsible for my mortgage if I am ill?
You are responsible for your mortgage, even if you are ill. As you took out the loan, it is your responsibility and your lender will be focussed on retrieving the money owed to them. You can take out a mortgage protection plan to guard against this eventuality.
A mortgage hasn’t been offered
1. Why have I not been offered a mortgage?
The lender should explain the reasons behind the refused mortgage application. This could be down to a number of factors, including your income against expenditure or the loan to value ratio you were applying for. Ultimately, if the lender views you as a risk, then they will not approve your loan. However, this does not mean that every lender will reject your loan, so keep shopping around.
2. Is there anything I can do to change their decision?
Unfortunately not, the lender who refused your loan will stand by their decision. You can still look around for other lenders who may be able to grant you a loan. Speak with an independent financial advisor, and they will discuss your options with you.
3. Do I need to check my credit history?
The mortgage company will have performed a credit check on you as part of the application and they will have factored this into their decision. You may want to check your credit history is to find possible areas for improvement.
Mortgage in principle
1. What does mortgage in principle mean?
A mortgage in principle means that the lender has agreed to loan you a set amount of money. This will show both the estate agent and seller that you are serious with your purchase, and this may help you to get ahead of other interested parties.
2. Can it still be refused?
Your mortgage in principle can still be refused. The mortgage lender, following the agreement of a mortgage in principle, will carry out further investigation into you and the property you are buying. They assess risk, as they don’t want to make any high-risk decisions, especially in today’s market. For instance, if you are buying a house for £150,000 but the valuation only comes back at £100,000 then the lender will not be willing to lend you the full amount – as the low property price means that they have no security.
3. How long will it be valid for?
Your mortgage agreement in principle will only be valid for a certain amount of time, which varies from lender to lender. They are usually valid for around three months. During this time the lender will assess your financial situation further and also research into the house you wish to purchase.
4. What documents will I receive?
You will receive a mortgage agreement in principle certificate, which will detail how much the lender is willing to lend you in principle. This will demonstrate to a seller that you are a serious buyer, and that you can afford their property. Once you have then agreed the purchase with the seller, you can make a formal mortgage application.
5. Do I need to let the estate agent/solicitor know?
We would always advise that you keep all involved parties up to speed throughout the process. Letting the agent know you have a mortgage in principle means that they can use this information when speaking with sellers. Keeping the solicitor informed ensures that the solicitor is able to complete the necessary paperwork as early as possible.
