Applying for a mortgage
The process of applying for a mortgage is very easy, although for some people it may be intimidating. At the end of the day what you are seeking to achieve is to satisfy the lender’s criteria so that he will lend you the money to buy a property.
All lenders have their own lending criteria although there are commonalities among various lenders. The lender will want to know what type of mortgage you wish to obtain. There are hundreds of mortgage products on the market but when you strip them back to their bones there are basically only two types ie capital and interest mortgage also known as a repayment mortgage and, the interest only mortgage.
Under a repayment mortgage your monthly mortgage payments consists of re-payments of capital and interest due on the mortgage. However, under an interest only mortgage you are only making monthly payments of interest and the capital sum remains unpaid until the end of the mortgage term.
Under a repayment or capital and interest mortgage because you are repaying both interest and capital at the same time the monthly mortgage payments will be higher than under an interest only mortgage. However, at the end of the mortgage term you would have repaid the full mortgage and will therefore own the property outright.
With an interest only mortgage you must take out some sort of investment vehicle such as an ISA or endowment insurance policy which will accumulate sufficient funds to pay off the mortgage or capital sum when the mortgage term comes to an end.
The lender will want to be satisfied that you can maintain the monthly mortgage payments. Therefore, enquiries will be made on the application form concerning your wages and any other sources of income such as commission and overtime or bonuses. In the city for instance huge sums are paid out in bonuses which are sometimes several times the city worker’s basic salary.
There will be enquiries concerning:
• Your credit rating- have you borrowed money before and with what payment history. The two main credit reference agencies holding records of this nature in the UK are Experian and Equifax.
• Type of property ie house or flat. If it is a house is it detached or semi-detached or a town-house or bungalow. Is it of brick construction and does it have a tiled roof?
• How many bed-rooms are there to the property? Does it have a garage or own parking facility for cars?
• What length of term mortgage are you applying for, 10 years, 15 years or 25 years? You will be asked for details of your date of birth to determine how many years mortgage you can have as most lenders have an upper age limit usually related to pension age.
• Is the mortgage to be in your name only or joint names? If joint names who are the other applicants?
These are just some of the questions forming part of the mortgage application you are required to complete. Most mortgage lenders will be able to give you a decision within a short period of time as to whether your application has been approved.
If your application was not successful you will be notified in writing. The problem with having a failed mortgage application is that it leaves a ‘footprint’ for other mortgage lenders you apply subsequently for a mortgage to see.
That is why it is sometimes beneficial to use a recommended ‘mortgage-broker’ in the first instance for your mortgages. He will go through all the relevant questions you are asked to complete on a mortgage application such as the one above. He will then be able to match you to the right mortgage lender according to your own personal circumstances and avoid multiple negative applications.
Make sure however, that he is an independent mortgage broker with access to the full range of lenders and mortgage products, and not a tied-agent only able to offer products only from one lender to whom he is tied as an agent.
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Disclaimer: The Publisher has strived to be as accurate and complete as possible in the creation of this website, notwithstanding the fact that he does not warrant or represent at any time that the contents within are accurate due to the rapidly changing nature of the Internet.
This site is a common sense guide to Applying for a mortgage. In practical advice websites, like anything else in life, there are no guarantees of income made. Readers are cautioned to reply on their own judgment about their individual circumstances to act accordingly.
This site is not intended for use as a source of legal, business, accounting or financial advice. All readers are advised to seek services of competent professionals in legal, business, accounting, and finance field.
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