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  • Writer's pictureRichard Jennings

Navigating The Mortgage Application Process

Knowing where to begin, when looking to apply for a mortgage can be a daunting task. There is lots of information out there, but sometimes this can make the process seem more complicated than it needs to be.


Finding the right mortgage and completing the application process isn’t just about finding the right house and signing some documents. To truly get the right mortgage for your circumstances you need to understand the different types of mortgages, know the current mortgage rates, choose the right lender to increase your chances of being approved, prepare your application and manage the whole process through to completion.


It can be a complex journey, but don’t let that hold you back from securing your dream home. With a little guidance, armed with knowledge and a good mortgage broker to take you step by step you can confidently steer your way through the mortgage maze.


So, are you ready to embark on this adventure?



A man following a compass to a house

Key Topics

 

  • Understand the different types of mortgages available, such as repayment mortgages, interest-only mortgages, fixed-rate mortgages, tracker mortgages, and discount rate mortgages.

  • Research and choose a reputable lender by verifying their credibility, comparing interest rates, evaluating their overall service and offerings, and considering their customer service and flexible repayment options.

  • Prepare your mortgage application by understanding the importance of your credit score, checking your credit report for inaccuracies, improving your credit score if needed, and gathering necessary documents such as proof of income, identity, and address.

  • Manage the property valuation process, preparing for potential discrepancies, researching similar properties in your area, understanding the valuation appeal process, and providing evidence of comparable property sales in your area.


Understanding Different Mortgage Types

 

Firstly, let’s begin by gaining an understanding of the differences in mortgage repayment methods and the various mortgage product types available.

Repayment mortgages are the most common type. You're paying off both the capital (the money you borrowed) and the interest each month. By the end of the mortgage term, you'll have paid off the entire mortgage and the property is yours.

 

The alternative to this is an interest only mortgage. With this payment option you are only paying the interest each month. At the end of your mortgage term you will need to have a means of paying back the original mortgage borrowed.


Once you have worked out which repayment method is best for your circumstances, its time to consider the different mortgage product types there are.


Fixed-rate mortgages offer you a set interest rate for a certain period.


Pro of a fixed rate mortgage:

They will provide stability in payments for the duration of your fixed rate deal. This can make budgeting easier whilst allowing you not to have to consider what is happening with rates in general.


Con of a fixed rate mortgage:

If your circumstances change and you need to repay your mortgage whilst you are still in your fixed rate deal you will have early repayment charges to pay. Similarly if interest rates drop during the term of your original deal you will not benefit from any rate reductions.


Tracker mortgages, have a variable rate that 'tracks' a nominated interest rate, usually the Bank of England Base (BofE) Rate.


Pro of a tracker mortgage:

As this is a variable rate you will benefit from any reductions to interest rates. For example, if your tracker tracks the BofE rate and this drops so too would your rate and your subsequent payment.


You may be able to find a tracker rate mortgage that also comes with the option of no early repayment charges, so should your circumstances change you can repay or change your mortgage without incurring these costs.


Con of a tracker Mortgage:

As the rate is variable, should interest rates rise then your mortgage rate and payments would also rise.


There are typically no restrictions on how high your rate rises, other than the rate it is tracking. This can make it harder to budget and manage your payments.

Tracker mortgages also will typically have a “collar” applied. This means that should interest rates fall to a set level, any further reductions would not be applied to your rate or payments.


Lastly, there are discount rate mortgages.

These offer a discount off the lender's standard variable rate for a set period. Much like a tracker rate these can rise and fall in line with each lenders own standard variable rate. They do not mirror an external index’s and can be changed at any given point by the mortgage lender.


Each of these mortgage types has its pros and cons, and it's important to understand them before making your decision.

  

Choosing the Right Mortgage Broker

 

After understanding the different types of mortgages, it's crucial to choose the right broker, as this decision can significantly impact your financial future. Here's how to navigate this important step:

 

You can't afford to overlook the brokers credibility. Ensure they're reputable and have a track record of treating customers fairly. Check their authorisation with the Financial Conduct Authority (FCA) and look for any complaints or sanctions. You can view the brokers registration on the FCA register here 


Read up on previous client testimonials or reviews, these will give you a good indication of the service provided and the value added by them to their previous clients.


Lastly, speak to the broker themselves, explain your circumstances and gauge their experience in that particular field. The mortgage market is broad ranging and covers a variety of different scenarios, some brokers will specialise in a set type of lending, such as First Time Buyer Mortgages, Remortgages, Buy To Let Mortgages or Mortgages for moving home.


Interest rate comparison is another crucial aspect. Remember, even a slight rate difference can result in significant savings over the term of your loan. Don’t just apply to your bank because that’s where your current account is. Compare rates from the whole of the market so you are seeing everything available to you.


Succeed in the Mortgage Application Process

 

Once you've chosen a broker, it's time to prepare your mortgage application – an important step that requires careful gathering and presentation of your financial information. This process involves understanding the Credit Score Importance and preparing a Documentation Checklist.

 

Your credit score is a vital piece of the puzzle. It's used by lenders to determine your creditworthiness and is a significant factor that influences the decision on your mortgage application. A high credit score can help secure a lower interest rate, so it's crucial to check your credit report for any inaccuracies and improve your score if needed.

 

As for the Documentation Checklist, it usually includes proof of income, proof of identity, proof of address, proof of your deposit and details of your debts and assets. It's essential to gather these documents in advance to speed up the process. Don't forget to provide information about your current employment and any outstanding loans or credit cards you have.

 

In essence, preparing your mortgage application requires attention to detail and thoroughness. It's not a task to rush through. By understanding your circumstances, personal and financial a mortgage broker can improve your chances of approval by applying only to those lenders whose criteria you meet.


Managing the Property Valuation Process

 

If you've diligently prepared your mortgage application, you're now ready to navigate the crucial stage of property valuation. This process is vital as it determines how much a lender is willing to offer you. However, it's not always straightforward. You may encounter valuation discrepancies, but don't worry, you have options.


Valuation discrepancies can occur when the valuer's opinion of the property's worth differs from your expectations or the purchase price. This could affect your mortgage offer. However, if you believe the valuation is inaccurate, you can appeal. It's essential you understand the valuation appeal process, which typically involves providing evidence of comparable property sales in your area.

 

Mortgage Frequently Asked Questions

 

What Happens if I Miss a Mortgage Payment?

 

If you miss a mortgage payment, you'll likely incur payment penalties. It's crucial that you communicate with your lender immediately to understand the repercussions and to negotiate a possible resolution plan.

This can have a lasting impact on your ability to borrow in the future, as late payments are recorded on your credit history.


Can I Still Apply for a Mortgage if I Have a Bad Credit Score?

 

Yes, you can still apply with a bad credit score. However, it's tougher. Credit repair strategies can improve your situation and affordability. You might want to consider these before applying, to increase your chances.

 

What Are the Implications of Co-Signing a Mortgage?

 

When you co-sign a mortgage, you're taking on significant responsibilities. If the primary borrower defaults, you're liable. This can severely impact your credit and make future borrowing more difficult. Be sure you understand the risks.

 

Can I Switch My Mortgage to a Different Property?

 

Yes, you can switch your mortgage to a different property. This is known as porting. However, it's subject to your lender's approval and may involve additional fees or conditions.

 

Conclusion

 

Navigating the mortgage process can seem daunting, but it doesn't have to be. Knowing your mortgage types, picking the right broker, preparing your application, and managing the property valuation can streamline your journey.

 

Keep these tips in mind, stay proactive, and you'll be on your way to homeownership in no time.

 

Remember, it's not just about getting a mortgage, it's about securing the right one for you.

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