Understanding 'overall cost for comparison'
When shopping around for a mortgage deal, it's easy to be seduced by headline-grabbing interest rates. But with so many factors to consider, it can be hard to compare like for like. For example, some deals may include application fees, product fees and redemption fees, while others don't.
To help consumers make an informed decision, all UK lenders must display an ‘overall cost for comparison’ percentage alongside the initial interest rate. This is also known as the Annual Percentage Rate of Charge (APRC).
The APRC is quoted as a percentage of interest payable on the total amount of credit. It includes all fees you may need to pay, including:
- the interest rate at the start of the mortgage
- the interest rate after the initial rate period has ended
- application fees
- product fees
- valuation fees
- redemption fees
When looking at the APRC, bear in mind that the calculation assumes you’ll stick with the same product and provider for the duration of your mortgage. This could be 25 years or more for a first-time buyer.
In reality, most people look to switch mortgage provider when their current deal comes to an end. That’s usually after two, three or five years.
Creating a budget breakdown
When you apply for a mortgage, lenders don't just look at your monthly income. They also look at whether you can afford to keep up the repayments after your monthly outgoings.
There are things you can do here to help build a stronger application. For instance, you could produce a household budget showing your monthly income and expenditure.
Include all household bills, plus essentials like food and clothing. Make sure the figures on your budget match the last three months’ bank statements, which you will need to supply with your application.
This will show that you're making a realistic application and pro-actively managing your personal finances.
If you can, clear any outstanding debts before making an application. One way or another, lenders will deduct the amount you make in credit repayments from the amount they are willing to lend you.
How to avoid credit score surprises
Your credit score plays a big part in your eligibility for a mortgage. It's wise to identify any unexpected results on your credit score before you apply.
Plenty of people have been caught out by a surprisingly low credit score. And to make matters worse, being rejected for a mortgage due to bad credit history will only harm your credit score further.
There are many reasons why your credit score can surprise you. For example, you may:
- have lived in a house-share with someone with a poor credit history. The shared address could have affected your score.
- still have links to a previous partner with whom you made a joint application for credit
- have missed a loan re-payment without realising. Even late payments can affect your score.
- have errors on your credit file
- have lived in lots of different places. Moving around a lot can affect your score.
A poor credit score doesn’t necessarily mean you can’t get a mortgage, but it can make it more difficult. Check your credit for free or at a low cost with a service like Experian or Equifax.
Making the most of your professional status
If you're a trainee or qualified professional (such as a doctor, dentist or teacher), you may be eligible for a 'professional mortgage'.
Lenders offering these mortgages will take your professional status into account and may offer you a higher loan or better rate.
Qualification criteria varies between lenders. Typically it includes factors such as age, professional qualifications, or registration with an appropriate governing body.
Your employment status will also need to be considered. For example, if you're applying for a mortgage as a self-employed person, you may need to provide additional information to show your lender that you can afford your monthly repayments.
The value of a mortgage broker
Finding the best mortgage for you and making a successful application is no mean feat. It’s complex, time-consuming, and can be costly if mistakes are made.
That’s why it’s worth thinking about getting your mortgage through a broker like Wesleyan Financial Services.
With Wesleyan Financial Services, you get:
- Advice from a Specialist Financial Adviser who specialises in your profession. They understand your pay, career progression, sick pay entitlements and pension contributions. As a result, they can help mortgage providers understand exactly what you can afford to borrow.
- Access to mortgage deals from right across the market, many of which are not available on the high street
- Advice on guarantor mortgages if you have family members who can help you get on the housing ladder
- Step-by-step guidance throughout the mortgage application process. We work with the lender directly and deal with both the application and the associated paperwork.
Our mortgage advice is fee-free, but we will be paid a fee by the mortgage lender upon completion of the loan.
Keep in mind your home may be repossessed if you do not keep up repayments on your mortgage