What Information will I need to provide a Mortgage Lender?

Every year, thousands of Britons go cap-in-hand to banks and other lenders to request the money to buy a home. From first time buyers to re-mortgages, buy-to-let investors to re-locators, getting that all important ‘yes’ from lenders can be a tough call.

This year’s mortgage acceptance rate was up, at around two thirds of applications being accepted, compared to just one in ten in 2010. Although the acceptance rate is improving as we move further away from the crash of 2008, borrowers still have a tough task on their hands if they’re going to secure a great mortgage at a great rate.

Being prepared for your meeting with your lender is the first step to getting an offer. Understanding what you need to bring along, what sort of questions they’ll be asking and what kind of evidence you’ll need to provide will stand you in good stead for a positive outcome to the meeting.

Paperwork

There are several pieces of paperwork you’ll need to have to hand at some point during the application process. Here’s what you’re going to be asked for:

• Proof of identity and address: You’ll need to prove that you are who you say you are, and that you live where you’ve said you do. This means you’ll need a proof of identity, such as a passport, photo driving licence or shotgun license. You’ll also need a proof of address, such as a mortgage statement, council tax bill, bank statement or utility bill.

• Proof of income: Each lender has their own set of requirements for proving your income, and it can be more difficult if you’re self-employed. In general, if you can lay your hands on three months of payslips and the last two years’ P60’s you’ll be well prepared. For those self-employed, bring along your accounts and SA302 tax calculations for three years and the corresponding tax year overviews. All available from HMRC website, speak to your accountant or mortgage broker for help.

• Proof of affordability: Your lender will be checking to see if you are able to afford the repayments you are agreeing to. For this reason, you should bring along any evidence of benefits, savings and investments coming in, as well as any credit commitments you have going out.

• Bank statements: Bring along the last three months of bank statements (at least) to show responsible income and outgoings for the month.

• Insurance policies: If you have existing life insurance, critical illness or income protection insurance, you should bring along evidence of this. It could work in your favour if your acceptance is touch-and-go with the lender.

It might seem like you’re being asked to pull together a PhD thesis just to apply for a mortgage, but take it one step at a time and it’s not that bad. The more you can gather before you even start applying for mortgages, the faster things will move and the easier it will become. Grab a folder and organise your life admin to ensure an easier ride.

Deposit

Most lenders these days are asking for a minimum 10 per cent deposit, and many are looking for 20 per cent and up. Whatever amount you’ve managed to save, you’ll need to prove to your lender that the money is yours before they’ll consider you for a mortgage. If it’s in an investment account or a bank account, you’ll need to bring along a statement. If it’s a gift from a relative or friend, get them to sign a letter saying they are holding the deposit for you.

Credit score

Your lender will run a credit check to make sure you are suitable for their loan criteria. There’s not much you can do about this if you do have black marks from the past, but do think about improving your credit score prior to applying for a mortgage to make it more likely that you’ll be accepted. Pay off what you can, check you’re on the electoral role and grab a copy of your credit report to make sure everything on there is correct.

Find out what lenders will be looking for in your credit report here.

Even after all that, you’re still not guaranteed acceptance on a mortgage. However, if you’ve taken the time to gather the paperwork and evidence needed, you’ll be ready to apply with another lender.

To save time and increase your chances of getting a mortgage offer, consider using the services of a mortgage broker. This way you’ll only need to provide your information once, they will also be able to advise you on what documentation can improve your chances, and have access to mortgage products that you may not have seen online or at your local bank or building society.

To discuss any of the above in more detail please do not hesitate to get in touch. Call 01252 759 233, email info@thesurreymortgagebroker.co.uk or comment below.

The Difference between Life Insurance and Mortgage Life Insurance

For anyone who is buying or has bought their own home, this question has probably crossed their minds at least once or twice. Mortgage life insurance and straightforward life insurance are two very similar products, but are designed to do two different jobs. Here’s what you need to know.

What Is Life Insurance?

Life insurance is a policy which you take out, usually voluntarily, in order to provide for your family if you unexpectedly pass away. There are many kinds of life insurance, some which last for a fixed period of your life, others which stay with you for the whole of your life. The settlement figure can be anything from a few thousand pounds, designed to cover the cost of your funeral, up to many hundreds of thousands; enough to pay off all your debts and leave a good nest egg for your family too.

What Is Mortgage Life Insurance?

Essentially mortgage life insurance does the same job; it pays out some money if you die unexpectedly. However, this type of policy is designed to only cover the outstanding mortgage debt, and will not pay for any other debts, any funeral costs or leave any cash for your dependants. This is also referred to as ‘decreasing term life insurance’ because the amount it pays out decreases over the years, in line with the reduction in your outstanding mortgage.

Things To Think About

Sometimes your mortgage lender will require that you take out mortgage life insurance when you agree to borrow the money. Other times, you may be looking to take out some form of protection so that your family are taken care of if you are not around.

Whatever your reason for investigating life insurance, there are a few things you’ll need to think about before you decide:

• Decreasing term or fixed term? Mortgage life insurance is typically a decreasing term policy, which reduces in line with your mortgage. This is the cheapest type of life insurance policy, but for a slightly larger investment, you could be covered under a fixed term policy. This policy would run for the same term as your mortgage, say 20 or 25 years, but would pay out the same amount all through the term. This means that as you pay off more of the mortgage yourself, you could be leaving a nice little nest egg for your loved ones.

• Lenders policy or a third party? Your lender may try to sell you their own mortgage life insurance, but are they offering you a good deal? You are not obliged to take their deal, and it’s a good idea to shop around to see what other companies can offer.

• Single or joint? A common problem with mortgage life insurance is that they can end up being joint. Usually, a joint life insurance policy is not worth having, and most good brokers will recommend you take out separate policies instead. Even if you have a joint mortgage, you aren’t required to have a joint insurance policy, so look to take out two separate agreements instead.

• Changing interest rates: When you set up your mortgage, your lender will help you arrange a decreasing term policy which will reduce in line with your mortgage balance. However, changes in the Bank of England base rate could dramatically change the outstanding balance on your mortgage over the term of the agreement. For this reason, it’s important to reassess your mortgage life insurance from time to time to make sure it’s still enough to cover what you owe on your house.

Mortgage life insurance is a great solution for those on a tight budget who don’t have any dependants to think about. It’s cheap, it covers what you need it to, and it will make your lender happy.

However, if you have children or other dependants, or if you want to pay off other debts in the event of your unexpected death, you should consider other types of life insurance too.

If your mortgage life or life insurance policies are up for renewal soon, and you would like some help investigating a better deal for you and your family, please do not hesitate to contact me. Call 01252 759233 or email  info@thesurreymortgagebroker.co.uk

Can I get a Mortgage when I'm Retired?

The number of people who still have outstanding mortgage debt when they hit retirement is on the rise. In fact, according to the Office for National Statistics (ONS), there are currently around 350,000 over 65’s who still owe money on their house. With around 40,000 of these mortgage deals coming to an end each year, retirees have no choice but to renegotiate a new deal on their borrowing.

Getting a mortgage is certainly possible in retirement, but it can be more difficult. Whether you want to move house or remortgage your existing home, it’s important you understand the challenges you face so you can adequately prepare for your financial future.

The Challenges Facing Retired Borrowers

There are several key challenges facing older borrowers if they are looking to remortgage or change mortgage providers in their retirement. Some of these are:

• Mortgage repayment periods are getting shorter

Big banks and lenders are getting tougher about when mortgages are expected to be repaid. For instance, Skipton recently cut their maximum repayment age from 80 to 75, and West Bromwich Building Society reduced theirs from 80 to 70. Many of the big players such as Halifax, Lloyds and Santander have a maximum age of 75, or 65 for interest only loans.

• Lower income may restrict the offers available

Once you are retired, your income will inevitably drop. Depending on how much this leaves you with, as well as how much you owe on your house, you could find your options more limited than they would have been if you had secured a deal while you were still working.

• Higher risk may increase the interest rate

Because it is viewed as riskier for a lender to take on an older borrower, you could end up paying a lot more for your mortgage than a younger person would. Interest rates may be higher and repayment terms shorter, so affordability can be a big challenge.

If you are still working at the moment but feel that the amount you are paying right now on your mortgage may not mean you’ve paid it off by the time you retire, speak to your lender sooner rather than later. While you’re still employed, you have many more options and better value for money deals available to you than you will when you eventually stop work.

How To Find A Good Mortgage Deal

If you are facing the reality of getting a mortgage either in retirement or one that won’t be paid off until after you retire, finding a great deal in good time should be top of your list of priorities. You can start by looking at online price comparison sites, however bear in mind that not all mortgage products will be represented on these. Try to use at least two or three different sites to get a good overview of the market.

Once you have an idea of what you could be paying and who is likely to take you on, consult a mortgage broker to uncover any other deals on the table. Some specialist deals for older borrowers are only available through brokers, so it’s well worth taking the time to go through things with these an independent advisor.

Make sure you pick a mortgage that is right for your circumstances, and one that you can afford the repayments on. Equity release may look appealing, as it could help you fund your retirement and pay off your mortgage sooner, but make sure you understand fully what this scheme involves before signing up to anything.

If you are struggling to find a mortgage, give me a call and we can explore your circumstances in more detail. Call 01252 759 233 or email info@thesurreymortgagebroker.co.uk

If you shop around for Car Insurance, why not do the same for Home and Contents?

In the current economic climate, we’re all looking to save money where we can. Around 77 per cent of us shop around for our car insurance so that we can get a better deal, and huge numbers of us also shop around for energy deals, loans and even for cheaper groceries.

Despite the widespread support for the ‘compare and switch’ approach, it seems that home and contents insurance has somewhat fallen through the cracks. An incredible 78 per cent of customers admit to accepting their renewal price without checking if it’s a good deal, which could be costing us dearly.

Home and Contents Insurance: Why Shop Around?

The most compelling reason to shop around is that if you don’t you could be paying more than you need to. Insurance companies will often offer new customers exclusive deals and discounts to get them on board, but then are at liberty to hike the renewal price, often without the customer realising it’s happening.

Energy providers have hit the headlines recently because they frequently stick automatically renewing customers on their most expensive ‘standard’ tariff. Chances are your insurance provider is going to do the same. Recent research by VoucherCodesPro found that on average, auto renewing home insurance customers were paying a whopping £339 a year more than the cheapest deal available to them.

Jot the date of your renewal in your diary, and make sure you’re aware of any notice period you must give. Get quotes in from comparison sites and then ask your provider to see if they can match or beat the best quote you found. Never allow your policy to auto renew; loyalty does not pay!

It’s Easy To Compare Quotes For Home And Contents Insurance

If you are keen to know whether you’re getting a good deal or not, you’ll be pleased to know it’s actually really straightforward to compare insurance costs. There are three main routes to getting comparative quotes:

1. Use comparison sites: Just as you do for your car insurance, there are many price comparison sites out there ready to help you source numerous quotes. Always go to at least two comparison sites to ensure you’re getting a good spread of offers, and bear in mind some providers will not be available through these sites at all.

2. Go direct: For the companies who do not quote via price comparison websites, you could go direct for a quote. Notable for their absence from price comparison services are Aviva and Direct Line, two of the UK’s largest insurers, so keep in mind you might want to go to them directly.

3. Use a broker: Sometimes brokers can obtain better deals on insurance than any consumer is able, particularly if you have an unusual house. If you live in a listed building, in a flood prone area or a house of nonstandard construction, it’s worth getting a broker to do the shopping around for you.

You may be offered insurance as part of your mortgage deal, or even from your bank, credit card company or supermarket. Whoever it might be offering to insure you, take the time to make sure you’re getting a good deal before jumping in to any agreement.

Top Tips For Getting A Better Deal

Whether you’re in the market for a new policy or are approaching your renewal date, there are some things you can do to help your home and contents insurance provider give you a better deal.

To get the lowest price possible, try to:

• Pay annually: Paying monthly is almost always more expensive than paying in one go.

• Buy contents and buildings together: If you need both, buying them together will offer significant savings over treating them separately.

• Increase your excess: Opting to pay a higher amount of voluntary excess lets your provider offer you a lower rate on the policy.

• Get the right cover: Try not to overestimate the value of your contents, otherwise you could be paying for cover you don’t need. Check what’s already covered by other policies, such as your packaged bank account or travel insurance.

• Stop smoking: Smokers tend to pay more for their home insurance because of the increased risk of fire.

• Fit smoke alarms: Good smoke alarms on every floor of your property will not just help to lower your insurance premium; they could save your life too.

• Improve security: Upgrading locks on external doors, putting locks on windows and installing security lighting can be effective ways to both make your home less vulnerable and your premiums lower.

While you are shopping around for a cheap home insurance quote, make sure you are comparing prices fairly by discovering all the hidden costs. Administration charges are one of the biggest hidden expenses on home insurance quotes, so be confident you’ve got all the facts from your provider before making any decisions.

If your home insurance is up for renewal and you want a better deal, contact me to see whether I can help. Call 01252 759 233 or email info@thesurreymortgagebroker.co.uk

How to pay off an Interest only Mortgage before you Retire

In the past, getting an interest only mortgage was actually a very intelligent way to afford the repayments on your dream home. The notion was that, as long as you linked a savings plan or investment vehicle to the mortgage, it would be no problem to pay off the outstanding amount at the end of the mortgage term.

Sadly, things have not always worked out that way. Many people who were sold interest only mortgages in the 1980’s and 90’s are now rapidly approaching the end of their mortgage term without any savings in place or a plan for how they will pay off the lump sum.

Research by Citizen’s Advice suggests that in the region of 934,000 homeowners in the UK who are currently on an interest only mortgage have no plan in place for the final repayment. They estimate that the average shortfall for these people is £71,000, meaning many people could be facing repossession when their interest only deal comes to an end.

Financial Changes Have Brought New Challenges

It is estimated that there are currently 3.3 million people in the UK who are in an interest only mortgage situation. An investigation by the Financial Conduct Authority showed that around 600,000 of these mortgages would be maturing by 2020, with many more maturing in stages over the coming decade. While the owners of such mortgages were aware that this was the situation, certain changes to lending rules and economic shifts in general, have caused them problems with repayment. For example:

• Recession: Interest rates have dropped drastically. Those paying into a savings or investment plan may be getting back significantly less than they had planned, causing a major shortfall in funds.

• No extension of mortgage: Lenders rules and criteria have changed drastically since the crash of 2008, and now it is very hard to get an interest only mortgage. The chances of extending a mortgage agreement on these terms is slim.

• No remortgage: Borrowers may have planned to switch to a repayment mortgage when the interest only period expired, but this might not be as simple as they thought. With tighter lending criteria and many of these homeowners over the age of 50, they are more likely to be turned down for a mortgage.

• Not easy to downsize: Some homeowners may have planned to sell up and use any equity in the property to buy a smaller place. However, this can be tricky, as house prices may not have grown in the way the owners had forecast, and they may have little or no equity remaining.

While the economic situation over the past few years has certainly made it awkward for some of the older interest only mortgages, it’s not all bad news. There are ways to ensure you have a smoother ride come the end of the agreed period, but it’s important to make those changes now rather than wait until things get financially strained.

How You Can Pay Off Your Mortgage Faster

If you’re on an interest only mortgage, there are a few things you should do right now, or at least start making plans for, to ensure you aren’t caught out at the end of your mortgage term.

• Switch part of your mortgage to repayment: While still paying towards the interest only deal on one part of your mortgage, switch a chunk over to repayment to start reducing your debt. You’ll still need to figure out where to get the lump sum from at the end of the interest only term, but you should be able to whittle things down a bit in the meantime.

• Pay more into savings: If you’ve got spare income, increase the amount you are saving each month by as much as you’re comfortable with. Be aware that the value of investments can fall as well as rise, so take good financial advice on this from a professional.

• Reduce the mortgage early: If you have savings already, talk to your lender about paying off a slice of your mortgage right now, which might enable you to afford a repayment mortgage sooner rather than later.

• Switch to a full repayment mortgage: If you can afford to, switching to a full repayment mortgage now while you are still credit worthy is a great way to stave off the risk of losing your home later on. The longer you leave things, the closer to retirement you get, and the riskier the prospect of lending to you will be.

• Plan to use your pension: If you have a good company or private pension that you’ve been paying into for some time, find out if you’re expecting a lump sum payment and how much this will actually be. Sometimes this can be as much as 25% of your pension, which could easily be enough to pay off your mortgage. However, do make sure it’s not going to leave you ‘house rich and cash poor’ in your retired years.

Whatever your plan, make sure you do have one. There is no obligation for your lender to do anything to help you at the end of the interest only term, and they are quite within their rights to demand you either pay up, sell up or get out. Put a plan in place now, and avoid risking your home and your future later down the line.

If you would like to discuss your options or have applied for a repayment mortgage and been turned down, please contact me. There are ways to pay off your interest only mortgage without losing your house and I would be happy to talk through these with you. Call me on 01252 759 233 or email richard@thesurreymortgagebroker.co.uk