British Asia News Network
Spring into your Finances
Back to Basics: Mortgages
Spring seems like the perfect time for new beginnings and fresh starts. With the days getting longer and the weather getting warmer (maybe this that's an exception this year), now is a good time to be thinking about springing into your finances, especially with the new tax year on the horizon. My Financial Doctor takes us back to the basics of what mortgage lenders will require of you when applying for a mortgage for the purchase of a property - be it for a residential property or a buy-to-let purchase.
As obvious as it may appear, this is the first thing mortgage lenders require. The proof of Identification should show the mortgage applicants’ full names and a photograph. Typically, this is a copy of a valid UK Passport or Driver’s License. For non-UK residents, applicants will also be required to provide proof of their right to remain in the UK, this may be in the form of a permit visa.
Proof of address is to ensure that addresses match with that in the application, examples of this include bank statements with the applicants’ full name and address, as well as a voting card to show that they are on the voters roll.
Please note, that most lenders will require two separate proofs of ID and address.
It is important for your mortgage advisor to know the following; your credit score, any existing credit, such as credit cards and hire purchases, as well as any issues, had with credit (e.g. CCJs). The credit score will determine whether lenders will lend, so it is important to score high. Companies such as Experian will run a credit report for a charge, but applicants are able to obtain a free, comprehensive report from Noddle.
As a side note, for those without a credit card and are looking to obtain a mortgage, a credit card is worth getting. Whilst there may be a stigma attached to credit cards – often with the fear of overspending and debt, it is extremely advantageous in building upon one’s credit score. It also allows mortgage lenders to determine whether borrowed money is being paid back on time, in parallel to potential future mortgage payments.
For those first-time credit card users, My Financial Doctor recommends small spends such as travel and petrol which can be readily paid, on time. This will build up the credit score, especially as a first-time buyer with no previous credit history.
The mortgage advisor will advise accordingly, but for employed individuals, lenders usually require payslips for the previous 3-6 months, whilst those who are self-employed will be required to present at least two previous years’ Tax Overviews and SA302s. This is in order for the lender to know that the applicant(s) can afford to pay the monthly mortgage payments.
In addition to this, lenders require corresponding bank statements with the payslips, to know where income is being paid into.
Whilst the mortgage lender will lend a significant portion of the property price, the lender will require proof of the remaining sum being put towards the property. This may be in the form of a bank statement showing the sum and where the deposit is held. Alternatively, if a close family member is contributing to the deposit amount, a gift letter will have to be drawn up stating the full name of the giftor, their relationship to the applicant(s), the amount being given as a gift, with a signature and the current date, as well as a statement declaring that the gift does not bear any interest to the applicant(s) and is not expected to be returned to the giftor.
A list of the applicants’ current outgoing direct debits is required in order for the mortgage advisor to compare incomings and outgoings. This is to be able to advise on the amount which can be borrowed.
Overall, having all these things prepared will ensure a speedier process in applying for a mortgage and keep within the time requirements set by the mortgage lender. It may be likely that the mortgage lender will require additional documentation but this is a good start on the essential documents required. Though, your advisor should be able to advise accordingly.
Any questions? Comment below or send us a message. Alternatively, speak to your financial advisor prior to applying for a mortgage.