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Mortgages: 5 rookie mistakes to avoid

Mortgages: 5 rookie mistakes to avoid

Buying a home is probably the biggest purchase you will ever make. So when it comes to choosing the right mortgage, it pays to do your homework. We've outlined five tips to help you stay ahead of the game.

1. Understand what the 'overall cost for comparison' means

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 apples with apples. For example, some deals may include application fees, product fees, and redemption fees, whilst others don't.

To help consumers make an informed decision, all UK lenders must display an overall cost for comparison percentage, also known as Annual Percentage Rate of Charge (APRC), alongside the initial interest rate.

The APRC is quoted as a percentage of interest payable on the total amount of credit. It takes account of all fees that may be payable 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

However, when looking at the APRC you should bear in mind that the calculation assumes you will stick with the same product and provider, for the duration of your mortgage (which could be 25 years for a first time buyer). In reality, most people look to switch mortgage provider when the term of their current deal comes to an end (typically two, three, or five years).

2. Pass the 'affordability' test

When assessing your suitability for a mortgage, lenders don't just look at your monthly income. They also have a duty to assess whether you can afford to keep up with the re-payments after your monthly out-goings.

There are things you can do to help build a stronger mortgage application in respect of affordability:

  • Produce a household budget detailing your monthly income and expenditure. This will help to demonstrate that you're making a realistic application and pro-actively manage your personal finances. Include all household bills as well as essentials such as food and clothing. Be honest and make sure the figures on your budget will tally with those on the last three months bank statements you will need to supply with your application
  • If you can, clear any debts you have such as student loans and credit card bills. In one way or another lenders will deduct the amount you make in credit re-payments from the amount they are willing to lend you.

3. Have confidence in your credit score

It's better to identify any unexpected results on your credit score before making a mortgage application than trying to rectify them during the application process, when time can be of the essence!  There are a number of reasons that your credit score can take you by surprise, for example, you may:

  • have lived in multi-occupancy accommodation or a flat. If you've shared an address or postcode with someone with a poor credit history, it could affect your score
  • remain linked to a previous partner with whom you have made a joint application for credit
  • missed a loan re-payment (even late payments can affect your score)

In some cases, you may be able to have inaccuracies on your credit file amended. The first step is to be clear on what your record contains.

There are many credit checking services available, at no or low cost.

4. Take advantage of your professional status

If you're a trainee or qualified professional (such as a lawyer, doctor, dentist, or teacher), you may be eligible for a 'professional mortgage'.

Lenders offering these mortgages will take your professional status into account and potentially offer you a higher loan at a preferential rate.

Qualification criteria may vary between lenders but typically includes factors such as age, professional qualifications, or registration with an appropriate governing body.

5. Don't overlook the value of a mortgage broker

Identifying the best mortgage for your personal circumstances, and submitting a successful application, is no mean feat. As well as the complexities involved, it's time consuming, and can be costly if mistakes are made.

At Wesleyan, we provide the following benefits. What's more, you won't be charged a penny for our advice (we will be paid by the lender once your application completes):

  • A dedicated and experienced Financial Consultant who is trained to understand your pay, career progression, sick pay entitlements, pension contributions, and so on - meaning they can relay this directly to mortgage providers so they truly understand what you can afford to borrow (which could be up to 95% of the purchase price)
  • Access to thousands of mortgage deals, many of which are not available on the high street
  • Advice on guarantor mortgages if you have family members who are able to help to get you onto the housing ladder
  • Step-by-step guidance throughout the mortgage application process (we will liaise with the lender directly and deal with both the application and the associated paperwork to support it, freeing up your time to focus on other things)
  • In many cases we may also be able to provide you with a 'decision in principle' quickly - giving you an indication of how likely a mortgage provider is to approve your application. This demonstrates to estate agents that you are serious about a purchase and you have the ability to afford the mortgage. This can lead to the property you have set your sights on being removed from further marketing
  • As well as supporting you to find the right mortgage, your Wesleyan Financial Consultant will also be able to help you with your home insurance and protection needs - saving you time and hassle in helping to protect what you have worked for

Don't leave your mortgage search to the last minute, contact us today so we can start the hard work for you, when the time is right.
Please quote reference 80765

This guide does not constitute financial advice. 

Your mortgage is secured on your home. Your home may be repossesed if you do not keep up repayments on your mortgage.

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Wesleyan Assurance Society and Wesleyan Bank Ltd are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Wesleyan Financial Services Ltd, Wesleyan Unit Trust Managers Ltd, Practice Plan Ltd and DPAS Ltd are authorised and regulated by the Financial Conduct Authority.  Advice about investments, insurance and mortgages is provided by Wesleyan Financial Services Ltd.

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