What is a mortgage?
A mortgage is a loan secured on a property. Most homes are purchased using a mortgage secured as a charge against the title to the property. Lending institutions are in competition for your business and there are a vast selection of different mortgages on the market, it is therefore best to consult an Independent Financial Adviser (IFA) before making your final decision. Your financial adviser will also be able to advise you on your upper limit as well as helping you choose the best mortgage to suit your personal circumstances. Most lenders will agree a mortgage offer in principal before you find a suitable property and many potential buyers prefer to have such an offer in place before they start to look at properties.
How much can I borrow?
The amount you can borrow is based on your income; status and equity in your property together with affordability of proposed monthly repayments both now and in the future. Most lenders work on income multiples in determining how much you can borrow. Usually, 3 to 3.5 times single salary or 2.5 to 3.75 joint salary, if two people are purchasing a property. Additional income e.g. commissions; overtime and bonus depending on the permanency and regularity may be taken into consideration.
Will I need a deposit?
You will need to provide a deposit unless you intend to borrow 100% of the property value.
What happens when my application is submitted to the lender?
Upon receipt of a completed application form most lenders will in the first instance carry out a credit search and pass the case on to their initial underwriting department where necessary checks will be carried out and any additional information supplied with the application will be assessed. Upon satisfactory underwriting, references may be requested and a standard valuation report instructed. Upon receipt of both satisfactory references, if necessary, and the valuation report the case will passed to the offer department for a formal offer of advance to be issued. It should be noted that the underwriting process may differ from lender to lender.
What is a credit search?
Also known as a credit score lenders use Credit Reference Agencies, organisations, licensed under the Consumer Credit Act 1974, which hold information about individuals in order to assist in making decisions about granting consumer credit. Credit scoring uses statistical techniques to measure the likelihood that an application for credit will be a good risk.
Additional Information
- Proof of Identification (e.g. Passport, Drivers Licence)
- Proof of Residency
- Evidence of your income (e.g. Pay advice, P60 and Bank Statements)
- Proof of how you handle your financial affairs
What is a Standard Mortgage Valuation Report?
All lenders are required by law to undertake a valuation before making a mortgage offer on a property. They will need to check the condition and marketability of your chosen property. This type of valuation is known as a standard valuation report and is arranged for the lenders benefit. They will instruct a qualified surveyor to view the property and make a report of their visit. This fee is normally dictated by the purchase price of the property and varies from lender to lender.
Mortgage Indemnity Guarantee (MIG)
Should you borrow a relatively high percentage of the properties purchase price (usually over 75%) your lender may impose a one off insurance premium however, this varies from lender to lender. This insurance does not protect you but insures the lender in the event of your property being repossessed.
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