As consumers are set for another year of low interest rates and increasing financial pressures unbiased.co.uk, has put together with the help of its expert panel of professional advisers twelve top mortgage tips for borrowers and first time buyers on how to get the best out of the current market.
1. Karen Barrett, Chief Executive at unbiased.co.uk
“Navigating a complex market of attractive mortgage deals and lending criteria can be somewhat overwhelming. An independent financial adviser or whole of market mortgage adviser will help you to make the right decision according to your current personal and financial situation. To find a professional adviser simply go to www.unbiased.co.uk/ and enter your postcode.”
2. Secure a credit rating – David Penney (Invest Southwest)
“If you have never had an overdraft, credit card or personal loan, consider taking out a couple of credit cards. Use them for spending and make sure you clear them every month. It will cost you nothing and you will begin to build up a credit rating, which the lenders will rely on to assess whether you are a safe bet. A good credit rating will not only help secure a loan, it will help secure the best mortgage deals.”
3. How to review your credit rating – James Carter (Independent James)
“Ensure that your credit file is in absolutely tip top shape. It is worth checking that all credit you have is up to date and registered correctly via the credit reference agencies. Also, is your full name and address correctly registered across your electoral roll, utility bills. and credit in one common format? This is particularly important if you are considering applying for a high loan to value mortgage.”
4. Have the correct paperwork ready – Bob Riach (Riach Independent Financial advisers)
“Mortgage Lenders are asking for more details in the current financial climate and first time buyers and home movers should be prepared to be able to give evidence of their financial position and ability to afford the mortgage. I always advise potential first time buyers and home movers to have the following documents available before submitting an application:
Proof of ID
P60
Last 3 months payslips
Last 3 months Bank Statements
Full documented details of any other income
Full documented details of any loans & Credit Cards
“Many lenders now want to see that the amount stated on the payslips matches the amount paid into the Bank.”
5. Budgeting – Paul Davison (J M Glendinning (Life & Pensions) Ltd)
“People should look to be realistic about affordability and look to budget before even starting to view properties. Speaking to an independent adviser will help clients whether they are first time buyers or home movers to find an achievable budget and work out borrowing capacity so they are confident when viewing properties that they are within budget and borrowing capacity.”
6. Lending to First Time Buyers – Ray Boulger (John Charcol)
“A repayment mortgage will be the most appropriate type for most First Time Buyers and most lenders only offer the repayment option unless the deposit is at least 25 per cent. Most lenders will want to see 3 months bank statements and so make sure you don’t exceed any overdraft limit, or don’t go overdrawn without an authorised facility.”
7. Don’t be drawn in by the headline rate – Dan Clayden (Clayden Associates)
“There are generally two ways to repay a mortgage – capital and interest & interest only. And, there are also broadly two types of interest – fixed (and capped) or variable (of which LIBOR linked, tracker and discounted are all variants). You should consider the pros and cons of each option before you decide which is most suitable for your needs. Make sure you don’t become a mortgage moth and get drawn in just by the headline rate … you need to take into account all of the costs associated with arranging a mortgage and balance these against any savings that a lower rate might give you on your monthly payments.”
8. Look at your product options early – Andrew Richards (Plutus Wealth Management)
“The ability for a borrower to reserve a product up to 6 months ahead of completing on that reserved product will allow someone today to secure a great low rated long term fix that may pay off. There is no obligation to complete if rates have stayed the same or improved.”
9. Review your mortgage – Jane King (Ash-Ridge Private Finance)
“My biggest tip would be to have your mortgage reviewed if you are currently on your lenders SVR. With fixed and tracker rates at historic lows it should be possible to pick up a much more competitive mortgage and consider offsetting if your savings are languishing in an account earning little or no interest.”
10. Buy to Let – David Hollingworth (London & Country Mortgages)
“With rental demand pushing up rents there’s been a renewed demand in the Buy to Let market and improved competition has seen better rates and choices available. Prospective landlords should think about a property that will attract strong demand from tenants for years to come, as Buy to Let should still be considered a longer term investment option.”
11. To fix or not to fix – Danny Cox (Hargreaves Lansdown)
“This week the US Federal Reserve has indicated that it will not raise interest rates until 2014. It is probable that they will lead the way and UK rates won’t rise until after the US rates have risen. That being so mortgage rates should remain broadly at the same levels for the next two years and mortgage payers should take this into consideration when thinking about fixing their loans. Unless a rise in interest rates would cause them a problem, a variable or tracker rate adopting a wait and see approach for the next couple of years would seem sensible.”
12. First time buying is a stepping stone – Kevin Tooze (IFA Equity partners UK)
“The past 4 years have shown that property will not always prosper. It is far more appropriate to think of your first property as a stepping stone, your very own and full of the freedom that comes with it such as: decoration choice, alteration choice, pets or not, sub letting, even growing your own veg if it has a garden. In time, yes it may appreciate and greater equity may be helpful but for now be happy you are paying for something you will own, rather than filling a landlord’s pockets.”
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