Five Things You May Not Realise That Lenders Take Into Account
The introduction of the Mortgage Market Review in April 2014 mean that the days of easy credit are long gone. Lenders now take a close look at your financial affairs and lifestyle before deciding whether or not to give you a mortgage.
Here are FIVE common which can affect your ability to secure the deal you need.
Irregular earnings: If you receive money from a cash-in-hand job, are self-employed or receive part of your income through commission, you are likely to have to go through far more rigorous checks than someone who is paid a regular salary by a large company, simply because lenders cannot rely on your income being the same, month in, month out.
Childcare costs: Many people do not consider that the necessary cost of childcare will count against them when they apply for a mortgage. Lenders take this outgoing very seriously when deciding how much to lend.
According to price comparison site uSwitch.com, 17% of families were offered a smaller loan or were refused a mortgage because of their childcare costs. If a lender knows you have a baby on the way, they might take this into account because it will affect your outgoings in the not-so-distant future.
Pension Contributions: Some lenders will reduce the amount that you can borrow in proportion with the amount that you are paying your pension fund each month. They treat your contributions as “committed expenditure” that could affect your ability to repay your mortgage if the interest rate rises.
However, it is a controversial area and not all banks think like this. The best advice is to find the right lender first, not reduce your mortgage payments before applying for a loan.
Bad money management: Lenders are very sensitive to applicants who do not appear to have their repayments in full control, so a missed credit card repayment here or a late bill payment there can affect your ability to borrow money.
Try to keep your finances under control and set up a monthly direct debit to ensure you never fail to pay at least a nominal sum to your credit card. Another tip is don’t make big regular payments to gambling websites – it waves a huge red flag to would-be lenders.
Recent credit applications: You may want the latest iPhone or a new credit card, or maybe you need to get a new car on finance, but if you do any of these be careful if you also need to remortgage.
Lenders like stability so anything that leaves a footprint on your credit rating – like all three above – could work against you. In fact, recent research by Money Mail found that some banks were reducing the amount they were willing to lend by as much as £35,000 for people who already had a car loan.
Not sure how your financial affairs will affect your ability to get a mortgage? Contact us today and we can give you all the advice you need.