Are you mortgage-ready ?

Are you mortgage ready ?

Buying a new home is, in equal parts, exciting and full of responsibilities. If you are planning to get a mortgage for your new house, it is important to be patient, alert, and precise in your approach.
Moreover, it is advisable to work with a skilled and experienced mortgage broker in your city.

For example, if you are looking forward to buying a property in Harrow, make sure you hire the best mortgage broker Harrow has to offer based on your requirements.

Especially if it is your first purchase, it is natural for most of you to be confused and don’t know where to start.
This is also the reason why it is important to engage with a mortgage broker.

Broker would provide you in right directions and help you secure a mortgage with best deals in the market.

Before you start the process of applying for a mortgage, here are some of the most important things you should keep in mind:

Mortgage type fixed or variable.

Before getting yourself a mortgage deal, make sure you are well known with the different types of mortgages you can apply for.
Based on your circumstances, budget, and other specific requirements, you can apply for different mortgage types.

One of the most important parameters used for setting apart the different types of mortgages is the interest rate.

Here are the different mortgages you can apply for based on the interest to be paid:

• Fixed-rate Mortgage – As the name suggests, this is a mortgage where the rate of interest does not change for a specific period (ideally 2,3 or 5 years). This allows the borrowers to know exactly how much they are required to pay every month as repayments. When the fixed-rate period ends, the interest rate becomes variable rate.
  Most borrowers prefer taking a new deal at this point in time, either with the same lender or a new lender. Know more here.
• Variable Rate Mortgage – As opposed to a fixed-rate mortgage, a variable rate mortgage involves the interest changing up or down and your monthly payments.
  These mortgages rates are set by your lender. Even if the base interest rate falls, there is no assurance that your lender would adjust their interest rate by the concerned amount.

Variable rate fall in 3 types.

Standard variable rate (SVR) – This mortgage rate is the rate you usually on once the fixed term rate is over.
These rates are expensive than other rates. You should remortgage to better rate if you are on
SVR.

Discounted rate – As it says the discounted rate mortgage is rate discount from standard variable rate for set period. Your monthly mortgage payment may change as discount rate determine by lender which can go up and down.

Tracker Mortgage – This is the mortgage type where the rate of interest changes on a periodic basis according to the base rate of the Bank of England. This would affect the repayments you made according to the changes in the Bank of England rates.

A bigger deposit better the interest rate

One of the most important tips for getting a mortgage is to understand the importance of a deposit. When you apply for a mortgage, a lender would ideally ask for a deposit of at least 5%.

However, if you are able to stretch this percentage and give a bigger deposit towards the purchase, you stand a chance to get a better interest rate and may increase the loan amount offer as you move to lower loan to value.

Pay attention on your credit report

During your mortgage term, lenders take the credit ratings of their borrowers very seriously. Before you apply for a mortgage, make sure you get your credit rating checked.

Doing so you can approach suitable lender avoiding decline of your mortgage. Mortgage lenders would assess your credit reports before approving your application. These reports would include details about your credit card debts, loans, overdrafts, and other utility payments over the last 6 years.

Maintain your debt-to-income ratio

Debt-to-income ratio is the ratio of the amount you owe to the income you receive. This is an important factor considered by mortgage lenders while assessing applications.

A higher debt-to-income ratio would imply that a large portion of your income already goes into repaying your debts. This would reduce your mortgage amount and reducing the chances of getting a good mortgage deal. Do not make unnecessary credit applications which may impact your lending decision.

Prepare a budget

Your income and your bank balance are not the only factors considered by mortgage lenders before approving your application.
They want to know if you would be able to afford to make all your repayments on time. For this, it is advisable to prepare a budget. Preparing an extensive budget would help you show your monthly income, expenses, and savings.

As you prepare your budget, make sure you cut down unnecessary expenses to increase your affordability.

Keep your documents ready

Getting a mortgage would require you to keep a few documents ready as proof lenders wants to see.
Make sure you have your photo driving license or your passport with you.

Also, check that your driving license contains your current address and your passport is valid at the time of making the application.
While making your mortgage application, you would also be required to produce your bank statement, council tax bill, credit card statement, utility bill, and other documents as required dated not more than month old for the last three months.

These were some of the most basic yet important tips for getting a mortgage successfully.
To get comprehensive assistance and the best deals in the market, make sure you work with mortgage broker whose services are in sync with your specific requirements.