Securing a mortgage is a tricky business. Especially if you are a first time buyer, you might find the prospect of applying for, and subsequently paying a mortgage pretty daunting. If you live in London and are looking to buy a property, you will know that the housing market here is expensive and fast-moving; you might have spent years searching for the right place. When the right place comes along, you don’t want anything to stand in your way – and that includes a mortgage application. This article will help guide you through different ways to secure a mortgage in London and have peace of mind when you do find that perfect pad you’ve been looking for.
Improving Your Chances Of Securing A Mortgage
When you apply for a mortgage, your fate is out of your hands. You present all your financial information, your credit score, your employment status and all the rest of your details, and you hope for the best. However, before you apply for a mortgage, there are things you can do to improve your chances of being successful. Here are just a few ways to boost your chances!
- Use the help to buy scheme
If you are buying a newly built home, you might be eligible for the help to buy scheme. This scheme gives an equity loan to help you to buy a property you may not otherwise be able to afford. In London, you can borrow up to 40% of the house price interest free for the first five years. This you don’t have to have a huge deposit laid away to buy your home, but instead you can use help to buy to boost your chances of being able to afford a home.
- Buy as a limited company
If you are buying a home in order to let it out, known as buy to let, it might be useful to look into buying as a limited company. Mortgages for limited companies are calculated differently to mortgages for individuals, meaning that you might be able to afford a better mortgage as a limited company.
- Improve your credit store
One thing that is greatly important when applying for a mortgage is your credit score. If you have regularly applied for loans, have paid back debts late or still have outstanding payments, this could lower your credit score and subsequently lower your chances of taking out the mortgage you want. In order to improve your credit score, try to settle any debts you have and make sure you are not late on bill payments, credit card repayments or anything else that could harm your chances.
- Build up your savings for a deposit.
The higher deposit you can make on a property, the likelihood of you securing a higher mortgage increases. This means that if you are yet to put away a substantial chunk of savings for a house deposit, you may want to wait a few more years before you buy. You will usually need around 5% of the property value, but around 15% is optimal for securing a decent sized mortgage. The bigger your deposit, the better your chances.
- Get your affairs in order.
Have you recently moved and forgotten to change the address on your bank account? Does your drivers’ licence need renewing? Do you have any outstanding paperwork to fill out for your car, current home or employment? This all seems like it has nothing to do with your new house, but any outstanding payments, paperwork or changes could look bad on a mortgage application. Before you apply for a mortgage, get your affairs in order.
- Stay realistic.
Applying for loans and being rejected further harms your credit score. In order to successfully get a mortgage, you need to be realistic in your goals. If you are buying in London, you will know that the housing market is tough as it is – make sure that you are realistic in the size of mortgage you apply for. After all, getting a mortgage is one thing, but paying it off is the real challenge. In order not to be overwhelmed by the debt you are saddled with, buying a smaller property to start off with might be the best bet. Particularly in the age of COVID-19 and economic uncertainty post-Brexit, it is far better to be safe than sorry.
Conclusion
When buying a home in London, it is crucial to know all there is to know about applying for and securing a mortgage. Use this helpful guide to get you well on your way to success.