Mortgages

Which? Mortgage Clinic – Part 1

Mortgage Clinic

As a first time buyer understanding mortgage terminology and knowing what mortgage is right for you can be difficult, so David and Which? Mortgage Advisers have joined up with First Time Buyer, to answer your mortgage related questions

DavidBlake 1 2303109217 O webDavid Blake of Which? Mortgage Advisers has more than nine years experience in the financial services industry and prides himself in helping first time buyers get on to the property ladder. In his current role at Which? Mortgage Advisers, David and the entire team provide independent, impartial advice and search thousands of mortgage deals to help buyers find the deal that is right for them.

Q As a parent, what options are available to me to help me get my son, who does have some savings, on to the property ladder?

A The fact that your son has some savings is good news as this could be used as a deposit, making that first step easier.

If your son finds it difficult to obtain a mortgage on his income alone, despite his savings, you could consider becoming a guarantor. It’s important to understand that, typically, the mortgage will be assessed on your circumstances as the guarantor and will involve looking at your income, expenditure and age, as well as your son’s. This isn’t always straightforward, but there are providers out there who are flexible on this type of lending.

If you have savings of your own, or would consider re-mortgaging your own property to release funds, you could gift him a deposit. The less he borrows by placing down a larger deposit, the less risk he presents a lender and the lower rate of interest he will pay for his mortgage.
You could also consider buying the property together by either becoming a joint borrower (while your son is the sole proprietor), or by buying the property in joint names and both owning the property.

In all circumstances, you need to seek independent legal advice to understand the risks associated with this type of borrowing.

Q Is there anything I can do to make myself more mortgageable?

A It’s worth assessing your circumstances before applying for a mortgage, and a good way to get started is by checking your credit files. Most lenders will base their lending decision on a risk assessment of the applicant’s case and a credit check. You can request a copy of your report from a credit check agency (CallCredit, Equifax or Experian). If you spot a mistake, it’s important to get this rectified.

Things like missing a payment on a credit card can count against you and so can a lack of credit history. A mortgage provider is after reassurance they’ll get their money back, so proving that you have the ability to take credit and repay it on time will help your application.

Your banking conduct should illustrate that you’re financially responsible, so think about your spending as this will also be assessed when applying for a mortgage in the way of an affordability check. If you’re in your overdraft and have the ability to get out of it, consider doing this.

Saving for a deposit is difficult, but it’s crucial unless you get some other financial help. In an ideal world, the larger the deposit, the better, as this will pose less risk to lenders and will see you obtain a better rate than if you had a smaller deposit.

You’ll need to demonstrate that the mortgage is affordable both now and in the future, so employment history is important. If you have recently started earning, or are looking to move jobs, consider the impact of taking a mortgage at this time as the risk of losing your job is higher during a probationary period. If you’re self-employed, lenders generally expect to see at least a two-year record of your earnings.

Seeking independent mortgage advice is a good place to start in order to understand the options available to you, taking all of these factors into account.

Q What is the biggest mistake first time buyers make when applying for a mortgage?

A With a plethora of things to consider when applying for that first mortgage, it’s understandable that first time buyers are full of misconceptions and can be overwhelmed by the whole experience. That said, there are a few mistakes I see time after time that are easy to fix.

Not registering on the electoral roll is a common mistake, yet it’s a crucial part of confirming identity and proof of address. Even for those that have registered, they’re often registered at their parents’ address, where they no longer live. This, in turn, means that bank statements and payslips don’t have matching addresses.

As I’ve said previously, lenders are looking for reassurance they’ll get their money back, so proving that you have the ability to take credit and repay it on time is important. However, many first time buyers may have favoured avoiding credit altogether and subsequently may lack a credit history.

Buying a property is the largest purchase most people make, so it’s easy to become fixated on the price of the property and forget about the various fees that accompany the purchase. First time buyers need to consider not only the cost of the property, but also additional costs, such as Stamp Duty, mortgage arrangement fees and even the cost of moving itself.

For further help and advice from Which? on the mortgages available to first time buyers, please visit: which.co.uk/ftbmortgages

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