No matter what stage of the property ladder you are on, selecting the correct mortgage can be a difficult and time consuming process. With multiple mortgage options available, the best deal will depend on individual circumstances. We have teamed up with experts at The Mortgage Genie to bring you some useful tips and tricks to help you get the best mortgage in 2022.
First-time buyers
With the need to navigate the complicated housing market and understand how much you can afford to borrow, the amount lenders are prepared to provide, the differing mortgage options available and how the entire process works, for first time buyers purchasing your first property can be a daunting task. There are however a range of actions you can undertake to facilitate this process and ensure the best mortgage deal is reached. These include:
Building up a good credit score– The better your credit score the more money lenders will be willing to provide. You can improve this by registering on the electoral register, paying all credit card bills on time and correcting any mistakes on credit card reports.
Government Schemes– The government have introduced multiple schemes aimed at helping first time buyers get onto the property ladder. These range from reducing the percentage deposit required to offering a discount on the market value of certain properties. It is worth researching to see if you qualify.
Put down a large deposit– The larger your deposit, the less you will need to borrow and the lower the interest rate on the total borrowed amount.
Buy with family or friends– With this option, the cost can be split between several people. Not only is this a more affordable option, it also increases the number of mortgage deals you can qualify for.
Prepare all Paperwork– Throughout the process multiple documents are required. To avoid delays, be aware of which ones are necessary and have them to hand. They are likely to include proof of income, proof of deposit and your most recent tax form.
Budget additional costs- On top of the deposit you will also be required to pay for a range of different things including stamp duty, survey fees, legal fees as well as the general cost of moving.
In advance of any progress with the mortgage front, we suggest reviewing your Credit File. The easiest way to do this is by using our free tool – Check My File. It’s free for the first 30 days, but you can cancel at any time once you’ve downloaded your report.
Second home
Obtaining a second home mortgage can be difficult as lenders will only cooperate if they deem this a financially viable option. They therefore perform a rigorous background check analysing both your credit score and the debt to income ratio on your desired property. It is therefore essential to be on top of all finances and able to explain how you intend to afford this investment.
Buying a second home is seen to be high risk and therefore requires significantly more upfront capital than a first property. Generally speaking, a minimum deposit of 15%, stamp duty with a 3% second home surcharge and the cost of surveyors and legal fees are required. Due to the excess cost, it is important to shop around to try and get the best deal for a second home mortgage. This can be a difficult process as there are multiple mortgage options out there and the best deal will vary depending on the intended use of the property. What’s more, lenders consider the intended use of the property in their decision. Many specialise in specific uses e.g. holiday homes, rented accommodation etc. and will not accept applications for different purposes. Because of this, it can be difficult to find the correct second home mortgage and it is recommended that you speak to a mortgage broker who can work alongside you throughout the entire process to ensure the best deal is reached.
Remortgage
In the correct circumstances, remortgaging your house can help you get a better deal on your current mortgage with lower interest rates and in turn save you thousands. Contrary to popular belief, you do not need to move lender to remortgage and your mortgage broker can explore options from your exiting lender. If you wish to borrow more than your current balance, or your financial situation has significantly altered then you may want to consider a remortgage with the extra capital too, although this does mean you’d be increasing the debt on your property and potentially paying interest for a longer period than a typical personal loan. Despite the obvious financial benefits remortgaging can provide, there is an element of risk involved as you may end up with a worse deal. With multiple mortgage deals available, it can become difficult to navigate. Following the subsequent steps will help you obtain the best deal.
Separate your finances– Ask credit agencies to separate your finances from those with which you have had joint finances to prevent their credit score from impacting yours
Keep other applications to a minimum– Avoid applying for things that will impact your credit score e.g. car insurance, or a mobile phone contract. Applying for too many things in a short space of time can make you appear desperate for credit.
Check your credit score before lenders– To convince lenders of your financial competence it is important to review all credit reports over the past six years and amend any discrepancies. The easiest way to do this is by using our free tool – Check My File
Do your research-With multiple mortgage deals it is worth researching the best deal for you.
Bad Credit Mortgage
Although there is no minimum credit score that will prevent you from securing a mortgage, the lower your score, the more difficult it is to get a loan approved. Typically, credit scores lower than 620 will not be approved and in some instances, a credit score 740 or higher is required. Not only does having bad credit inhibit your ability to receive a loan, but the best interest rates are reserved for low-risk customers. It is therefore recommended that you take the necessary actions to improve your credit score before purchasing a property. To do this there are a number of steps you can take. These include:
Review your credit report– Check your credit report for any mistakes. Your credit report may contain errors which, if not rectified, can be damaging to your credit score. The easiest way to do this is by using our free tool – Check My File
Stick to a budget– Track your expenses to avoid going into debt and look for opportunities to save.
Save- You will need to prove to a lender that you have finances to fall back on and that securing a mortgage will not drain your bank to zero.
Do not close credit cards– closing a credit card will reduce your borrowing power and cause your credit score to drop.
Consider a rapid rescore– Some alterations to your credit score can take a while to go through the system and may fail to show up in time for your mortgage application. A rapid rescore allows lenders to submit proof that their applicant has made recent alterations to their spending habits allowing the borrowers to receive lower interest rates.
Speak to a mortgage broker– One of our experts will be able to help find the best deal for you no matter your financial situation.
No matter whether you are purchasing your first property or an experienced home owner, securing the best mortgage deal can be a difficult process. We hope that you have found this article useful and gained some useful insights into getting the best mortgage deal for you.
