Top tips on how to understand a mortgage

January 2016

Buyers in most areas currently have more choice than ever, so before embarking on your house-hunting mission, make a list of what is important to you before aimlessly viewing loads of properties.

You need to think about location in relation to work and family, house type, running costs and future saleability amongst many other things. Take your time when viewing properties and maybe consider taking a friend or relative with you for an alternative point of view.

One thing you cannot forget is your budget... We’d recommend that you get a good idea of how much you can borrow before you start to look for your new home. Try to avoid borrowing the maximum lending limit and consider what is affordable for you. 

  • Use Lender’s or Broker’s mortgage calculators to give you a guide on how much you can borrow and how much this would cost on a monthly basis; most will have some form of calculator on their website 

  • Put together a personal monthly budget planner to determine whether this will be comfortable for you going forward 

  • Keep in mind the cost of moving when considering the amount of money you have available for deposit and home improvements 

Alternatively give an independent mortgage broker a call. They would be happy to assess your affordability and borrowing potential, identify the most appropriate lender for your individual circumstances, and can even arrange for a suitable lender to provide you with a Mortgage Certificate which is an 'agreement in principle' for the amount you are able to borrow (subject to status and credit checks). This can help simplify the mortgage process later on and also ensures any offer you make on a property is taken seriously by the vendors. 

A few hints and tips to help you when applying for a mortgage: 

  • Lenders like to see stability so factors such as regular job changes can have an impact on whether they will lend 

  • Make sure you are registered on the electoral roll at your current address 

  • If you were not registered on the electoral roll at previous addresses, try to obtain copies of bank 

    statements and/or utility bills going back over 3 years to prove where you lived 

  • Keep hold of your latest P60, last 3 month’s payslips AND last 3 month’s bank statements 

  • Having some credit is a good thing as long as your payments are kept up to date and you are not over- 

    indebted as lenders like to see how you manage credit commitments 

  • If you don’t currently have any credit, it is always worth considering taking out a credit card to 

    establish a credit history ... but do make sure you repay the balance in full every month 

However ...... 

  • Avoid applying for unnecessary personal loans, ‘buy now pay later’ agreements and running up large credit card balances – they will all affect the amount of mortgage available to you 

  • Ensure you are operating well within any agreed overdraft on your bank account 

  • Do not apply for any Pay Day Loans as these indicate financial instability and may well lead to a mortgage being declined 

  • Avoid comparison website quotes as they can result in multiple ‘footprints’ on your credit file which can lower your credit score and may affect the amount of mortgage available 

  • Pay your financial commitments on time – that includes utility bills and mobile phone bills as well as loans and credit cards as they all show up on credit files and just one payment late by a couple of days could lead to a mortgage being declined