Mortgage Anyone?

Have you had to try and get a mortgage lately? Do you know why many are finding it harder to get one? Well here is a summary of my experience trying to get a mortgage.

Background

On 26^th April 2014 the Mortgage Market Review (MMR) came into effect, setting out new ‘tighter’ lending criteria. Basically, lenders need proof that borrowers can afford the loan with new ‘stress tests’ to account for future mortgage rate increases.

By July 2014, market research reported 40% individuals felt it was more difficult to get a mortgage (source)

While in August another states that just over 50% still don’t understand MMR (source)

Well, I recently had to experience the dreaded new process and to make matters worse I’m self-employed which I heard makes it more difficult.

Where did I start?

Firstly I ‘realised’ well ahead of time that I needed to shop around to find the best deal. I decided not to wait for the current deal to simply move onto the standard variable rate.

Next, I hunted around for my mortgage papers, any corresponding annual mortgage statements and what I thought lenders would need to review (45 minutes later)…

Using the internet I started to gain a better understanding of what the rates are that suit my situation and what I was looking for. You can use online guides for current mortgage deals.

I contacted my current provider, asked about their procedure and quickly realised that I’d have to complete a lengthy mortgage ‘factform’, produce heaps of statements, proof of identity and also go into a branch for an interview – which I heard can take ages; not that convenient and still no guarantee for approval.

What did I do?

I went to an independent advisor. Why? Well, they

1 – have access to many mortgages on the market

2 – know what is required and explain it in ‘plain old English’

3 – do most of the ‘donkey-work’

So I sourced an advisor (use BeeMyMinder FCA independent advisors via the click here button), had a brief conversation providing background to my circumstances, the property I have and what I’m looking for, completed their mortgage application form (which they completed the majority for me over phone) and let the journey begin.

Truth be told, I (and the wife) did have to supply a lot of supporting documentation this included proof of identification, bank statements, payslips, P60, SA302, proof of rental income, other mortgages policies, proof of address, with some required to be certified by the Post Office. But you can’t get away from this.

How did it go?

My advisor very quickly reported back with a selection of relevant deals, explained what each of mortgage product included as well as arrangement fees, lawyers costs, their fees etc. Also which institutions I’d struggle with being self-employed (in fact: my buy to let provider was one of them and I’d wasted 2+ hours completing forms, mailing them across and then being declined).

The wife and I jointly decided on the best mortgage deal for us 3.19% fixed for 5 years, annual 10% early repayment option and ability to ‘port’ the mortgage; all with fixed arrangement fees.

Given the efficiency of the advisor and ongoing guidance throughout the process the whole affair went smoothly and there were no unforeseen issues.

Words of wisdom

1 – Lending volumes are declining. It’s being reported a 12.3% reduction in approved mortgage from Sept 2013 to Sept 2014. Lenders are desperate to catch-up and are enticing borrowers with ultra-low mortgage rates. So get in now!

2 – Be prepared to answer a lot of questions. Especially on your spending habits (see this article) as lenders require evidence you can fund future mortgage rates increases. So get your house (hive) in order. Pay off debt and try to remove unnecessary spending. Lenders can review bank statements line by line and question your expenditure!

3 – Work out what you can afford. Use a mortgage calculator and try out different scenarios e.g. if rates are at 5, or 6%. As this article shows, only a slight increase could put you under pressure . Get ahead of the pack!

4 – Lastly, get in an expert. FCA independent advisors are there not to pull the wool over your eyes. In fact, major banks are now joining up with mortgage brokers as they don’t have the in-house expertise and can’t recruit in to meet demand. If it’s good enough for the lenders, it’s good enough for us! 

5 – Load your new mortgage policy into www.beemyminder.co.uk, add key policy details and share it with those required. My reminder is set… for 5 years off!

This is my experience, do you have a mortgage story to share? What tips can you offer? What traps to be wary of?

Note from the Author: While on my mortgage journey I come across many terms and acronyms I didn’t understand (some used above – sorry about that). So I’ve decided to develop a jargon buster to help people out (watch this space).

Last updated by Nigel Brokenshire at June 21, 2016.