Mortgages - Understanding the current market conditions

I have many clients struggling to understand the current mortgage markets. These concerns maybe about rates, equity or deposits, fees and even tie in periods.

OK, each lender has their own criteria or set of rules when it comes to their lending policy. These include and is not limited to the following: age of the client, term of the mortgage, employment type such as contracted worker, self employed, foreign nationals or temporary workers; income; affordability; existing commitments such as credit cards and loans; property type and not forgetting credit history.

This list is typical of the requirements that need to be satisfied before even applying for a mortgage and unfortunately are not always clear unless you use a broker or Independent Financial Adviser (IFA) to assist you.

The first thing to say is that a broker or IFA will only be able to advise a client on the best options if the client is honest from the outset and credit scoring aside, the lender will usually require proof of income in most cases and this will be in the form of 3 months bank statements and/or 3 months wage slips in any case. The only exception being Self Certification mortgages (or Self Cert) where proof of income is NOT required. We will discuss these types of mortgages in more detail another time!!

It should be clear by now that as each lender has differing criteria, should your personal circumstances not meet with one particular lenders criteria, it may not exclude you from satisfying the criteria of another lender. Some lenders are looking for a particular type of business whereas others don’t want a particular type of business, but there is usually something for everyone – it’s just a case of matching the clients requirements with a suitable lender and product and this is when searching the internet can become confusing!!

So what are the common problems?

Well in recent months here at Reeves Financial Solutions, we have found that the main reasons for a mortgage being declined have been the property type such as prefabricated buildings or properties above commercial premises – a lot of lenders won’t touch them and the second is affordability. Each lender has their own way of working out affordability and is normally based on net income(s) minus existing commitments with a multiplier and that is where some clients fail – it is simply deemed that they could not afford that mortgage. Some Lenders still use income multipliers such as 3.5 X salary, but this is just an indicator, more of a guide – so, yes it could appear that your income is sufficient to borrow the desired amount of mortgage, but in reality after the affordability is calculated, this may not be the case.

As you can see, obtaining a mortgage is more than just finding the best rate with the lowest fees, it’s a bit more detailed than that; however for most people there are no issues. That said getting a professional to check things through could save you some frustrations as well as time and money!!