Is it impossible to get a mortgage these days?
Much depends on your circumstances. Lenders prefer borrowers with big deposits of 25 or 40 per cent, and squeaky clean credit histories: they are offering buyers and those remortgaging who are in this position the best rates. But if you have a smaller deposit – say 10 per cent – it is still possible to get a loan although there is less choice of products and rates are higher. Speak to SPF about the options open to you.
Why can’t I go direct to my bank for a mortgage?
You could but there is no guarantee that you will get the right deal for your circumstances. Having a ‘relationship’ with the bank already will not influence the rate you get, or the service you receive. The advantage of using an independent mortgage broker such as SPF is that we have access to a wide range of deals, some of which can’t be accessed via the lenders. We can also advise you on the best deal for your circumstances, help with the application and chase the lender to ensure the mortgage is processing within your specified timeframe. If you go direct to the lender, you are subject to service levels which can be extremely poor.
At what stage should I speak to a broker?
As soon as you start thinking about buying your first home or around six months before you are due to remortgage. If you buying your first home, SPF will help establish how much you can borrow so you don’t waste time looking at properties you can’t afford. In this climate, where it is more difficult to get a mortgage, vendors will also take you more seriously if you have already contacted a lender to get a ‘decision in principle’.
If you are remortgaging, you should leave plenty of time because rates are volatile so it may be worth securing one several months before you need it.
How much can I borrow?
If you are opting for a residential loan, it depends what you can afford. Lenders are increasingly using affordability calculators rather than strict income multiples. This means they take into account your existing debt – on credit and store cards, overdrafts and personal loans – as well as your outgoings and income, when deciding how much you can borrow. It will also depend on your credit score. As a general rule you can borrow around 4 times income if buying alone or 3 or 3.5 times joint income.
If you are opting for a buy-to-let, the amount you can borrow will depend on the rental income of the property.
Is there a charge for paying off my mortgage early?
There may be, depending on the deal. A number of fixed and discounted rates come with early repayment charges (ERCs) which mean you have to pay a penalty of around 2 or 3 per cent – perhaps more of less – of the mortgage amount if you try to exit the deal early. Lenders charge this to ensure that it is financially viable for them to offer the preferential mortgage rate in the first instance.
However, some deals are ERC-free so if there is a chance that you may want to exit or pay the mortgage off before the fix or discount ends, opt for a loan which has no penalties at any time.