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The Mortgage Options in the United Kingdom has a broad spectrum. Types are not limited to Repayment Mortgages, Interest-only Mortgages, Fixed Rate Mortgages, Variable Rate Mortgages, Tracker Mortgages, Discounted Rate Mortgages, Capped Rate Mortgages, Offset Mortgages, and Buy to Let Mortgages.
Whichever mortgage you apply for, your lender will want to know you can continue to make your repayments. Even if interest rates rise, or as a result of any planned events affecting your financial circumstances.
You’ll need to provide evidence of your income and provide information about your outgoings, including Debts, Household bills, and Other costs, such as clothing, childcare and travel. To prove your income, you might have to produce payslips and bank statements. Lenders will work out your household income – including your basic salary and any additional income you receive from a second job, freelancing, benefits, commission or bonuses. Checking affordability is a much more detailed process. Lenders take all your regular household bills and outgoings into account, along with any debts such as loans and credit cards, to make sure you have enough left to cover the monthly mortgage repayments.
They also have to ‘stress test’ whether you could still afford the mortgage repayments if interest rates were to rise, or if you were to retire, go on maternity leave. Besides, they’ll make a Credit Check with a credit reference agency once you make a formal application to take a look at your financial history and assess how much of a risk lending to you might be.
If you’re struggling to get a mortgage to buy your first home, you might want to consider a guarantor mortgage. This means a parent, guardian or close relative agrees to be responsible for paying the mortgage if you cant. In the past, mortgage lenders based on the amount you could borrow mainly on a multiple of your income. This is known as the loan-to-income ratio. For example, if your annual income was £50,000, you might have been able to borrow three to five times this amount, giving you a mortgage of up to £250,000.
Now, when you apply for a mortgage, the lender will cap the loan-to-income ratio at four-and-a-half times your income.
Guarantor mortgages shouldn’t be entered into lightly. They’re legally binding arrangements. Your guarantor needs to be able to afford to pay your mortgage if you get into difficulty. You’ll need to talk to a mortgage broker to find out more about which lenders offer guarantor mortgages.
It’s never too early for you to start thinking about arranging a mortgage as this can be time-consuming. You can get a mortgage from an Independent Financial Adviser (IFA), mortgage broker or lender. Once you’ve found a mortgage product you like, agree with it as a mortgage ‘agreement in principle’.
This tells you how much money the lender is likely to offer and the interest rate you’ll pay. You might have to pay a booking fee to reserve the mortgage product you want. Typical cost: £99-£250, but in my case I didn’t pay anything.
Before you apply for a mortgage, check your credit report for any errors and to get an idea of your score. Lenders will look at it when considering your application. My score was pretty good. After you have received a binding mortgage offer, your mortgage lender must give you at least seven days to think about whether or not this is the right mortgage for you.
You can use this time to compare this offer with other mortgages. If you’re sure that this is the right mortgage for you, you can let the lender know in less than seven days that you want to go ahead. Mine was with the LLOYDS Bank. My Mortgage advisor was Adehi of LLOYDS Bank Wembley Branch. She understood all the requirements and suggested the right products. Since the first meeting with her, I gained the confidence that Lloyds can be me home loan lender. Throughout the process, I have contacted her in various instances, and she was patient enough to answer all my valid questions and stupid questions.