How to make your new mortgage more affordable
12/03/2008
With the global credit crunch already taking its toll on the property market and utility bills set to rocket, it has never been more important that your mortgage commitments are manageable. If you’re making a new application, these tips will help to ensure that the home of your dreams doesn’t become the cause of financial nightmares.
Know your limits
The starting point for an affordable mortgage is knowing how much you have to spend – and sticking to it. Your calculations should include fees, stamp duty, moving costs and ongoing expenses – such as council tax – as well as estimated mortgage repayments.
It’s always tempting to stretch your budget. But, if you do, you’ll risk ending up like one of 14,000-plus households who, according to the Council of Mortgage Lenders, had their homes repossessed in the first six months of 2007.
Do your homework
Today’s mortgages tend to be extremely large and rather frightening – but finding out as much as you can about what’s on offer will make the process less daunting and help you to get a good deal.
As well as taking expert advice from an independent financial advisor or your bank, you can get consumer advice from the Council of Mortgage Lenders at www.cml.org.uk. You’ll also find useful analysis of financial web sites, personal finance pages in the newspapers and specialist magazines.
Check your financial CV
This means looking at your credit report – which is what a lender will do when you make an application. Your credit report lists your loans, credit cards, existing mortgages and any other credit you’ve taken out. It also contains your repayment history and other information that helps lenders to assess the risk that you will not repay what you owe. For example, a bankruptcy would count against you, while a track record of making repayments on time would weigh in your favour.
If you’re buying with anyone else, get them to check their credit report too. Yours could be excellent but if your buying partner has any problems, it will affect both your chances.
You can see your Experian credit report for free with a 30-day trial of CreditExpert, the UK’s leading online credit monitoring and ID fraud protection service.
Understand the process
Mortgage lenders take the information on your application form and in your credit report and allocate a value to each item. The total is your credit score, also known as your credit rating. Generally, the higher it is, the easier you’ll find it to borrow money.
But it isn’t quite as simple as that. Every lender uses a slightly different calculation and some have different calculations for different mortgages. So you could have a different credit rating for every application.
The one constant in this process is your credit report – so make it as good as it can be.
Clear up misunderstandings
Make sure that your credit report is up to date and accurately reflects your circumstances. If you find anything you think is wrong, contact the lender that submitted the disputed information and explain why you disagree – you’ll need to provide proof. If you’re right, they’ll have it removed from your report. And if something needs further explanation – for example, you once missed some repayments because of illness – you may be able to get a note added.
Avoid so-called credit repair companies – they cannot help to change your credit history.
Get on the electoral register
Lenders use the electoral roll to check that you live where you say you do and are who you say you are. If you aren’t registered at your current address, they may ask for further proof of identity or even reject your application. You can download a voter registration form at www.aboutmyvote.co.uk.
Find the best mortgage
You can take a lot of the work out of finding your ideal mortgage by comparing mortgage deals with LowerMyBills.co.uk. This will let you see the different offers available and their relative merits, so you end up with the best value deal.
You may even be able to apply online – but be certain only to do this once. If lenders think you are making a full mortgage application they’ll search your credit report and leave a record, known as a footprint, which might cause other lenders to think you have been rejected repeatedly, are desperate for money or even involved in a fraud.
Double check your credit report
It’s a good idea to check your credit report again before you put in your application. That way, you can ensure that all your details are totally up-to-date and correct – and everything will go smoothly.
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