Organise your mortgage as soon as you think you have found a new home. A mortgage can take a few weeks to organise and process; you may be able to reduce the delay by getting a decision in principle before you have found your new home to be.
The amount you will be able to borrow is determined by your income, your employment status, the size of deposit you can provide and whether you have any other financial commitments to meet.
There are two ways you can find a mortgage. The first way is to shop around among the different mortgage lenders. The second way is to go to a mortgage broker or financial adviser who can search a database of lenders to find a mortgage to suit you.
The approach you use will depend on what kind of person you are. Some borrowers are more comfortable getting their mortgage from a lender they have dealt with before; for example, they simply use the bank which runs their current account. Others are determined to get the best possible deal, and so use a broker to shop around from the thousands of different mortgages available. The great advantage of the Internet is that you can do this “shopping around” yourself online, and then apply at a time that suits you, perhaps in the quiet of your own home with help a free phone call away.
Some of the factors you might want to consider in weighing up different loans are:
- Does the mortgage guarantee a fixed rate of interest (and hence monthly payment) for the first few years? This can be a help during the early years, when your finances may be stretched. But look out for early redemption penalties which can make it costly to change lender.
- Will the loan let you take payment holidays if you should find the repayments become a strain at certain times of year? Flexible loans which offer this facility can be helpful for people whose income fluctuates from one month to the next.
- Does the mortgage offer you a “cashback” lump sum at the outset? Loans like this can help you pay for furniture, carpets and all the other things you will need in your new home.
- Will the loan still be affordable when any fixed-rate or discounted period is over? When special offer periods like this come to an end, your mortgage will move to the lender’s standard variable rate which may be significantly higher.
The mortgage code protects borrowers by setting out minimum standards which lenders and mortgage intermediaries have to meet. You can find out more about the code by visiting the Council of Mortgage Lenders’ website at www.cml.org.uk
Once you have chosen and applied for a mortgage, the lender will want some supporting documentation. The information your lender is likely to require includes:
- Evidence of your income and commitments, such as recent pay slips, a P60 and your bank statements.
- Information from credit reference agencies, your employers, other lenders and your landlord.
- Proof of identity, such as a passport or birth certificate.