MORTGAGES
Getting a mortgage
Exploring the world of mortgages can be daunting, especially for first-time homebuyers. Roxburgh Financial Services is dedicated to making this process as smooth and straightforward as possible, offering expert mortgage advice tailored to your unique financial situation.
Understanding the intricacies of securing a mortgage is crucial, and our team is here to guide you through each step, starting with the essential act of saving for a deposit.
Preparing for your mortgage
Securing a mortgage is one of the most significant financial milestones in an individual’s life. An essential preliminary step in this endeavour is amassing a deposit. This initial investment represents a portion of the property’s total value, influencing the competitive edge of the mortgage rates available to you. The loan-to-value (LTV) ratio plays a pivotal role here, determining the proportion of the property price you’ll need to borrow. For instance, a 10% deposit necessitates a 90% LTV. A more substantial deposit can lead to more favourable loan terms, highlighting the importance of diligent savings.
Evaluating your spending habits
Reviewing your spending habits thoroughly before applying for a mortgage is crucial. Lenders employ affordability assessments to ensure potential borrowers can manage their loan repayments. Given the strict lending standards to safeguard the economy, preparing your finances is advisable. By curbing unnecessary expenses and streamlining your budget, you position yourself as a more appealing candidate to lenders.
Significance of your credit score
Another part of mortgage preparation involves scrutinising your credit score. This metric is a staple in lenders’ assessment criteria, making it imperative to rectify any inaccuracies in your credit report ahead of time. Ensuring your financial history is accurately represented can prevent unforeseen obstacles in your mortgage application process.
Navigating your financial capacity
When considering a joint property purchase, it’s essential to understand how mortgage providers calculate loan amounts. Typically, loans are capped at around four-and-a-half times the combined annual income of applicants, though some lenders offer flexibility based on specific criteria. Borrowing within your means ensures your financial stability throughout the loan period.
Understanding the 'Agreement in Principle’ or ‘Decision in Principle’
A proactive step in the mortgage application process is obtaining an ‘Agreement in Principle’ or ‘Decision in Principle’ from a lender. Although not a definitive approval, an AIP provides a precise estimate of the loan amount you may qualify for based on preliminary assessments of your financial status. This step involves a soft credit check, which does not impact your credit score, offering valuable insight as you search for your ideal home.
Organising your paperwork
The foundation of a smooth mortgage application is thorough preparation, starting with organising all necessary paperwork.
To expedite the process, ensure you have the following ready:
- A valid Photo ID (e.g., passport or driving license)
- Recent utility bills proving your current address
- Bank statements from the last three to six months
- The previous three months’ payslips or a P60 form
For self-employed individuals, the document requirements extend to:
- Two years of SA302 tax return forms
- Tax year overviews from HM Revenue & Customs
- Certified accounts for a minimum of two years
- Evidence of ongoing or future contracts if you're a contractor
Choosing the right mortgage type
Understanding the variety of mortgage types available is crucial. Each type offers different benefits and terms:
Repayment Mortgages
Repayment Mortgages: Monthly payments go towards both the loan principal and interest.
Interest-Only Mortgages
Interest-Only Mortgages: Only the interest is paid monthly, with the principal due at the mortgage’s end.
Fixed-Rate Mortgages
Fixed-Rate Mortgages: The interest rate remains constant for a set period.
Variable-Rate Mortgages
Variable-Rate Mortgages: Interest rates may fluctuate in alignment with the Bank of England’s bank rate.
Tracker Mortgages
Tracker Mortgages: A variable-rate mortgage that tracks the bank rate plus a fixed percentage.
It’s also important to consider the mortgage term length, which affects monthly payments and total interest paid. Bear in mind that lenders may have age restrictions on mortgage terms and various fees could be associated with different mortgage deals.
Seeking professional mortgage advice
Navigating the intricacies of mortgage applications requires expertise. Roxburgh Financial Services brings years of experience to guide you through selecting and applying for the right mortgage. We take pride in offering personalised advice, ensuring you understand all your options and what they mean for your financial future.
Mortgage offer
A complete mortgage application can only proceed once you’ve selected a property and your offer has been accepted. But once you have obtained your mortgage offer, this marks a critical step in the home-buying process. After reviewing your application, if the lender is satisfied, they will extend a formal offer to you. This process typically unfolds over about four weeks, which is essential for advancing towards the purchase. Mortgage offers have a standard validity period of six months, during which buyers are encouraged to finalise their acquisitions.
Should unforeseen delays occur, there’s a possibility of requesting an extension of the offer period, though it’s crucial to note that not all situations permit an extension. Failing to secure an extension necessitates beginning the application process from the beginning.
After receiving your mortgage offer and completing all necessary legal work by your conveyancer, the stage is set for the legal exchange of contracts with the seller. This pivotal moment solidifies the transaction between both parties. Subsequently, your conveyancer coordinates the funds transfer from your lender to the seller on the decided completion date, effectively cementing your property ownership.
Ready to move forward with your mortgage application?
At Roxburgh Financial Services, we’re committed to making your mortgage application as straightforward and successful as possible. Our dedicated team is here to support you, from organising the initial paperwork to finalising your mortgage choice.
Together with our highly experienced team, we’ll find the perfect mortgage solution for your life. Start your homebuying journey with confidence.