Right to Buy, a mortgage option that can help you out when you’re wanting to purchase your council property.
The scheme was introduced to help individuals living in council properties purchase the property they’re living in. As a Right to Buy mortgage applicant, depending on how long you’ve lived in the property, you may receive a discount on the property that you’re applying for.
This discount is likely to be used as your deposit, meaning you can organise your remaining savings to help with the rest of the process.
You may also be able to borrow money if you want to make home improvements for the property. Some lenders may allow this, but you will need permission from the Local Authority beforehand.
The Right to Buy scheme is simply a way to help council house owners take a mortgage out on the property they’re living in.
The first step to getting a Right to Buy mortgage is completing a RTB1 and finding out whether you’re eligible or not. If you’re unsure of how to do this, you can contact your local authority or a mortgage broker in Sheffield like us. We can help you get your right to buy process in Sheffield started.
Following this step, someone will arrange for a property survey to be carried out on your property. This means that the local authority can get a true value for your home and can work out the mortgage amount. You should also be able to access a Right to Buy discount on the property. This discount can be used for your deposit or used on solicitor, legal or arrangement fees.
Like the usual mortgage process, you’ll have to provide evidence that you can afford a mortgage and pass affordability assessments prior to being accepted. This is why it’s essential that you’re managing your finances well and being sensible with your money during the months leading up to your Right to Buy mortgage in Sheffield.
When taking out a Right to Buy mortgage, you’ll come across similar fees and costs that applicants taking out a regular mortgage come across:
In summary, Right to Buy presents a great opportunity to council house owners and gives them chance to get onto the property ladder. A scheme like this is something to look into if you’re thinking of buying out your council property.
You will, however, have to live within the property for a certain amount of time before you can sell it, otherwise, you’ll be issued with a penalty. This will be in the form of repaying a sum of money linked to the original property discount generously presented at the start of the process.
If you can afford to purchase your council home and can compensate for new costs such as property damages and repairs, the scheme could be for you. Remember that an affordability assessment will be carried out before you take one out, so make sure that you’re as prepared as you can be.
So, you are now ready to take a further step up the property ladder and further your mortgage goals. Whether you are a first time buyer in Sheffield, new to the experience or a home mover in Sheffield looking to sell your current home and live somewhere else, you will still need to start getting prepared for your mortgage.
Here are some expert tips from an open and honest mortgage broker in Sheffield:
As an experienced and well trusted mortgage broker in Sheffield, we always recommend taking advantage of mortgage advice as early on in the mortgage process as you can. This will allow you to get an idea of how much you could possibly borrow and what your estimated monthly costs may be.
You need to prioritise getting an up-to-date credit report, as you will need to know what your current credit score is and what you could potentially do to improve it, if necessary. The better your credit score is, the higher chance you have of your mortgage application being accepted.
There are a lot of different ways that you could potentially improve your credit score in Sheffield and to the surprise of many, it isn’t always too difficult to do so. In some cases, it is even possible to obtain a mortgage deal despite having a low credit score, though this ultimately depends on your lender and the way they look at your circumstances.
By ensuring you have both a mortgage advisor in Sheffield by your side and an up-to-date credit report to hand, you could increase your chances of being accepted for a mortgage in the future. A trusted mortgage advisor in Sheffield will be able to work through everything on your behalf, guiding you throughout the process.
Here at Sheffieldmoneyman, we have the ability to obtain a fully credit-checked agreement in principle for you, something we can turn around within 24 hours of your initial appointment.
A dedicated mortgage advisor in Sheffield will help you to get prepared for everything prior to submitting your mortgage application.
In doing this, your mortgage lender will want to see some proof of identification, so that you can prove you are who you say you are, along with where you are living and the amount that you earn from your job.
In knowing this, you can now prepare for all the necessary documents you’ll need. These are as follows;
In terms of proving who you are you’ll need to produce some photo ID. Acceptable types of ID include a driving license or valid passport.
In addition to the above, you’ll need to prove where you live. You’ll need to produce a utility bill or original bank statement dated within the last 3 months.
Lenders will always have a keen interest in what your spending habits are, compared to anything else.
They need to be absolutely sure that you will have the ability to regularly maintain your monthly mortgage payments on top of everything else you have going out. They will analyse your bank statements very carefully and take everything into consideration.
Lenders aren’t too fond of seeing gambling on your bank statements. It’s something we often see catching people out, as they haven’t realised that it can harm your chances of obtaining a mortgage down the line. They also don’t like seeing customers go over their overdraft limit, as this basically means your spending money that isn’t there.
It’s reasons like this why we always advise that you be careful and make sure that your statements are going to appeal to a mortgage lender, rather than put them off from lending to you.
You will have to prove you have the funds in place for the deposit and also be able to evidence this for anti-money laundering purposes. Try not to move money around your various accounts too much as it will make evidencing the audit trail a more complex process than it needs to be.
Lenders take a preference to applicants who are able to evidence that they have been saving for their deposit. It shows that you have a good understanding of how to put money aside every month and not spend money you don’t have. You’ll also need to factor in any large credits into your accounts.
Quite often we find that the money for a deposit has been gifted by family members. These funds will also need to be evidenced, with the “donor” being required to sign a letter for the lender. This will be to confirm that the funds are strictly a gift and not something they will be needing back from the mortgage applicant.
In terms of affordability, the most important thing is to be able to prove your income. If you are employed this tends to be done by providing the lender with your last 3 months’ payslips and most recent P60. Lenders often take into account regular overtime, commission, shift allowance and bonus.
Make sure that you do plenty of research ahead of time. Preparing for your mortgage and making a note of your anticipated outgoings after you move house puts you in a great position prior to starting the application process.
You can work out an estimate of how much the council tax and utility bills will be. In addition to that, you can also work out your regular expenditures, such as any food and drink you will be buying. This will demonstrate how much disposable income you have available to pay your mortgage from.
You need to accommodate lots of time to prepare for your mortgage application. It can sometimes be a lot quicker and much easier to approach a mortgage broker in Sheffield who can take the bulk of the process and do it on your behalf.
A mortgage advisor in Sheffield will be able to work out how much everything is potentially going to cost you and guide you through the entire mortgage process, doing their best to work hard and try to secure you a competitive mortgage deal.
Getting ahead and planning early will always impress your mortgage lender. Let an expert mortgage broker in Sheffield help you out. Get in touch to book your free mortgage appointment with a trusted mortgage advisor in Sheffield.
The higher that your credit score is, the higher the likelihood that your application will be accepted by the mortgage lender. This is different to the likelihood of someone with a poor credit score finding the same success. A mortgage lender will study your application carefully in order to make sure you can definitely afford their mortgage.
That being said, there are still no guarantees when it comes to mortgages, even if your credit score is pretty high. Each mortgage lender will have their own specific criteria that you need to match in order to obtain their deal, and it is unlikely that you will meet all of those.
Each lenders criteria could be vastly different to another and they have developed their own unique ways of figuring out whether you match what they’re looking for or not. In some cases, you might actually find yourself matching up with the majority of them and in some cases, maybe you only match up with a few of them.
It is the job of your dedicated mortgage advisor in Sheffield to work alongside you and find the right lender who is offering the best deal for your personal circumstances, with criteria that you can meet. Whether your advisor is from your bank, the lender or a trusted mortgage broker in Sheffield like us, they will match you up to your mortgage needs as best they can.
Getting in touch with a mortgage broker in Sheffield will be of a great benefit to you, as our experienced mortgage advisors will work their hardest to find you the best deal for your personal situation, always having your best interests at heart.
You will be updated on a regular basis with exactly what is going on, so you’re not left stressed and confused about the process. It’s one of our many aims during your mortgage journey to make sure everything goes as smoothly and stress-free as it possibly can.
Whether you are a First Time Buyer in Sheffield, planning on Moving Home in Sheffield or Self Employed, we will do our best to provide you with helpful tips and tricks to help you improve your credit score and eventually, secure an amazing mortgage that you’ll be thrilled to be walking away with.
There are a variety of different credit reference agencies in Sheffield you could go with, though the most popular ones are Experian and Equifax. Before you rush into anything, make sure that you do some research into each agency as it is possible that some of them may be holding incorrect data and it could help you identify any discrepancies.
We personally would suggest using a platform called Check My File, as this collates data from all the major ones like the aforementioned two, giving you a wider overview of how your credit file is looking. In signing up, you will receive a free 30-day trial, followed by a monthly fee of £14.99. Your account can be cancelled at any time prior to the end of the trial should you see fit.
There are lots of different things you can do to improve your credit score. Here we have some for you to have a look at:
You will find that having multiple credit searches taken out against you could actually end up having a negative effect on your credit score in the long run. Even the use of price comparison websites is a factor that could harm your credit score.
If you are planning to apply for a mortgage, we strongly suggest that you avoid applying for any other credit in the meantime. Paying your credit back is a good thing for your score in the long run, providing that you can show lenders that you are able to maintain your monthly repayments.
That being said, borrowing during a mortgage application is something that could make the lender think that you cannot afford the deposit and are relying on the credit to give you a financial boost.
A great yet very simple way for you to get a boost to your credit score, is to register yourself for the electoral roll. It can demonstrate stability and this is something that the lenders like to see. You must make sure that your name is spelled correctly, and you must include your current registered address, not your previous one.
If you are not registered on the voters’ roll, you should definitely sign up for it. It is very easy to do online and it is something that could contribute well to improving your credit score.
Maxing out your card each month is something else that can actually reduce your credit score. The lender will prefer to see that you are using a credit card and paying off the balance in full each month, as this will show that you are good with your money management.
If a lender sees that you are exceeding credit card limits or overdrafts,it might give them the impression that you don’t take your finances seriously. This once again could drastically harm your chances of getting accepted for a mortgage.
Sometimes, if you have forgotten to tell a previous credit provider that you’ve moved into a new property, it can come across like you are actually living in multiple properties at the same time. Lenders don’t like to see this so you must make sure that you are on top of your address history so that it displays correctly on your credit report.
If you have a family member or ex-partner financially linked to you, this could be affecting your score without you even being aware of it. If the account is still live, then you won’t be able to get the financial association removed. If you want to remove any of these links, you should absolutely get in touch with the credit reference agencies and make a request.
Applicants see credit scoring as an unfair way to assess a mortgage application. Your mortgage lender would disagree with that, as at the end of the day, they are in the business of making money and they need to be sure you will be able to keep up your payments. It’s also much cheaper for them to operate through a computer-generated credit scoring system, as this keeps the process consistent and efficient.
Send an up-to-date copy of your credit report to your dedicated mortgage advisor in Sheffield ahead of time to increase your chances of being accepted the first time. The more your in-the-know your advisor is regarding your finances, the better it will be.
Also, there are still some lenders that prefer to operate the way companies used to and will manually assess your application. They will still have rules that they stick by regarding the number of defaults and CCJs that they will allow customers to have.
Once you’ve had your offer accepted on a property, you are going to move onto the next stage of the mortgage process… getting the property surveyed.
A property survey is carried out to determine whether the true value of a home correlates to the amount that a buyer has offered for it. The survey will also show the overall condition of a property, highlighting defects and damages (if there is any).
There are lots of different types of property surveys, however, three stand out as the most popular amongst the crowd:
A property survey may be carried out free of charge depending on the lender that you use. If you are offered a free survey, you may be limited to what you can see on the report, or sometimes the lender may not give you a copy.
Each survey differs, some will provide great detail and tell you everything that you need to know about your property, whereas others will not. Usually, the more that you pay for a survey, the more in-depth the report will be.
If your survey shows something about the property that you weren’t told about, by law you are allowed to approach the seller and work out a price reduction is necessary.
A Mortgage Valuation is the simplest property survey and usually the cheapest. They are carried out to find out the true value of a property.
Before committing to lending to you, your lender will need to find out whether the property’s value matches how much you are set to borrow from them. If you put in an offer above the property’s value and it gets accepted by your seller, it’s good for them but not for your lender, therefore it’s unlikely that your lender will accept your application. This is because they will have to lend more than the property is actually worth; this is called a down valuation. If you can make up the difference between what you said you’d pay and the mortgage amount, you’ll be able to go ahead with your lender, although, if you can’t then the lender will pull out of the deal.
Unfortunately, a Mortgage Valuation survey will not point out minor damages or repairs, it will just show clear structural defects that will require attention as soon as possible. If you want a report that goes further in-depth, you will have to pay more to upgrade to a different survey.
A Homebuyers Report focuses on the safety of the property and how safe it is to live inside of it. The report will include problems such as mould, dampness or something that does not pass the current building laws.
This survey will be carried out by an expert. They will thoroughly examine the property from top to bottom so that they know exactly how safe it is to live in.
As a Mortgage Broker in Sheffield, we usually recommend a Full Structural Survey, especially to those who are purchasing an older building. You sometimes need to be aware of everything.
This survey is the most expensive of the three and usually them all. This is because your surveyor will look at the whole property, often spending a whole day to determine its worth and to find out what’s wrong with it.
If the purchase goes through and you now know everything about the property, you may have saved yourself a lot of money in the long run as if you didn’t know about the damages, you couldn’t act on them meaning that they could worsen overtime.
New builds usually requires a different type of survey called a snagging survey. This will highlight both minor and major issues. It could be from a missing door hinge to cracks in the ceiling.
If the new build has already been built, it would be wise to have a property survey carried out on it before you move into it. Just because the property is a new build doesn’t mean that there is nothing wrong with it. As a Mortgage Broker in Sheffield, we would always advise that you have some sort of survey carried out on a property.
Whether you are a first time buyer in Sheffield or moving home in Sheffield, if you are struggling to choose the right property survey or just need general mortgage advice, feel free to get in touch with our team. Sometimes, it can be difficult to get the ball rolling when it comes to moving home, so make sure to get in touch if you need any help!
You can obtain the services of a surveyor to carry out a Homebuyers report or building survey through the Royal Institution of Chartered Surveyors.
An Agreement in Principle (AIP) is a statement or certificate from a lender to say that, in principle, they would lend you a certain amount and proves a First-Time Buyer in Sheffield like yourself that you are credit-worthy.
If you are looking to get one, you need to get in touch and provide us with information about your mortgage needs and situation. Then, once we have processed your details, we can suggest how much you may be able to borrow.
As a devoted mortgage broker in Sheffield, we can usually turn around an agreement in principle for you within 24 hours of your enquiry. Your Agreement in Principle can last anywhere between 30 and 90 days, depending on the lender. If your Agreement in Principle expires before you use it, it can be easily refreshed by speaking to your mortgage advisor in Sheffield.
When applying for an Agreement in Principle, the lender will run a credit check to evaluate your eligibility. You will need to ask what level of credit survey they do. If the lender runs a hard credit search, it will leave a ‘footprint’ on your credit file visible to other lenders.
A search footprint is a record left by a credit reference agency every time your credit report gets searched, either by yourself or by others. If there are a high number of hard searches in a short period, it can harm your credit score as it could signal that you’re struggling to get accepted by other lenders.
However, if the lender has chosen to run a soft search, it won’t leave a footprint, and it won’t impact your credit score.
An AIP cannot guarantee that you will get a mortgage offer – you will still need to go through the entire mortgage application process when you find a property you want to buy, but this will help strengthen your chances.
An AIP usually is valid for up to 30 – 90 days, and our mortgage adviser in Sheffield will be able to use the information as part of your mortgage application process. However, they will want to make sure the details are still correct.
Some factors may affect the lender’s decision when making a complete application, such as their lending criteria or personal circumstances that have changed.
You may be a First Time Buyer in Sheffield, or you might be thinking of moving to the area and are looking for excellent mortgage advice. If this is your situation, we believe that you will benefit from our dedicated mortgage advice service in Sheffield.
We offer a free initial mortgage consultation with one of our expert mortgage advisors in Sheffield, so please get in touch today and let us get the ball rolling on your mortgage application so that we can secure you an agreement in principle.
Lenders will look at various aspects when it comes to your bank statements. Their main job is to decide whether or not you are the kind of person that they are going to want to lend to. They want an applicant who can manage their finances responsibly and is going to be able to keep up-to-date with their mortgage payments.
Regarding your bank statements and what lenders look for on them, let’s take a look at gambling transactions and how they can sometimes affect your ability to get a mortgage in Sheffield.
Whether it’s a once every couple of months or a regular occurrence, gambling in large amounts can often trip your mortgage application up. This also applies to you if you are frequently gambling. Whether you are losing money or not, you may be declined due to your gambling habits.
At the end of the day, no one can tell you how to live your life, although, it is always advised that you ‘gamble responsibly’. Remember that a lender needs an applicant that doesn’t oppose risk to them. They need someone who’s going to meet their mortgage payments month on end; they want no risk of repossession.
Put yourself in your lender’s shoes, would you lend money to someone who has the tendency to gamble frequently with large sums of money or someone who’s always on top of their payments and doesn’t gamble their money?
It is in no way illegal to gamble, therefore, the occasional gambling transaction on your bank statements will not mean that you’ll get automatically declined. They will assess the gambling transactions though, looking at whether they are reasonable and responsible. They will look at how frequent you gamble, the size of the transactions and how they relate to your income.
If you are infrequently gambling in small amounts, it should make no significant difference to whether you get accepted or not. Lenders may even just brush it under the rug. On the other hand, if you are a regular gambler, their viewpoint may be the opposite. You can’t be eating into your overdraft due to gambling either, it will reflect badly on your application.
Lenders will examine your bank statements carefully. They will be looking for lots of different things, but ultimately, they want to see your bank statements and get the confidence that you are a reliable applicant that they’d be willing to lend to.
If you are exceeding your overdraft limit month on month, your lender may begin to think that you struggle to take care of your finances. It’s likely that they’ll be okay with you doing so, however, we always advise that you be wary. They will also look for any other existing credit commitments that you have; it could be a credit card or a loan, etc. This is an important factor as you need to compensate a set amount each month to pay back the loan – the same as mortgage payments.
You should also look out for credit transactions from pay-day loan companies or otherwise known as “undisclosed” loan repayments. These can cause problems if you told them that you had no further loans to account for but then they appear on your bank statements. You need to be transparent with your lender and tell them everything prior to them viewing your bank statements.
As a mortgage broker in Sheffield, we will always say that the easiest way to improve things is to be sensible and if it’s possible, plan ahead.
Usually, your lender will ask for a minimum of three months bank statements. So, in theory, before you apply, you can get yourself prepared and maybe tone down on things such as gambling and dipping into your overdraft. All the little things can sometimes help.
If you use a mortgage broker in Sheffield like ourselves, they will help you with this whole process and recommend the option that will benefit you the most. There are some specialist lenders out there that will ask for fewer bank statements than others, a mortgage broker may be able to help you access one of these deals.
At the end of the day, the message to remember is to gamble responsibly and take care of your finances!
If you are a first-time buyer in Sheffield and this is your first hands-on experience with the mortgage world, you should definitely get specialist mortgage advice from a mortgage advisor in Sheffield. They will guide you throughout the whole mortgage process and help you with your application and get you on track.
Each lender has a different playing field when it comes to credit scoring. You may find it easy to pass with some lenders and hard with others. If you fail to pass a credit score, lenders can sometimes be unhelpful and not tell you the exact reason why you failed. This can be down to a mixture of things and they can’t find exactly why your application was unsuccessful.
This is where your local expert Mortgage Broker in Sheffield offers you a helping hand. If you are able to obtain a copy of your credit file, come and speak to one of our Mortgage Advisors in Sheffield and they will try their best to match you with a lender that you have a high chance of passing with. Also, offering a deposit of more than the minimum of 5% will increase the chances of you passing a credit score for a mortgage.
There a lot of different ways that you can improve your credit score in Sheffield. If you have a credit card, using it regularly and paying it off every month is a great way to prove that you can keep on top of payments. Registering on the voter’s roll can also really help and is really easy to set up. If you also have any old bank accounts or store cards that are no longer in use you should get them closed down as this looks better from the lenders’ viewpoint. You can read about more ways on how to improve your credit score here or you can watch our YouTube video “How To Improve Your Credit Score”.
If you have failed a lenders’ credit score, don’t worry! There are lots of different lenders out there, all with different criteria. You should eventually find one that you will fit perfectly. On the other hand, don’t apply for too many hard credit checks as the more you do the worse effect it can have your file. Lenders can clearly see you are failing over and over, possibly removing all of your chances of passing altogether.
As well as having their own unique lending criteria, each lender will also have their own way of how working how much you are able to borrow. It is more than normal to approach ten different lenders and receive ten completely different answers. Some will be lenient and some will be strict. For example, if you are Self Employed in Sheffield, the lender may be more generous. You will find that some lenders will assess 100% of an employee’s overtime and bonuses and others may not, it depends on the lender. Others may allow you to pass with “unearned” income such as tax credits, child benefits and maintenance.
As a trusted Mortgage Broker in Sheffield, we hold over 40 different lenders on panel. We can approach any of these for you, without the need for a credit check, to perform an affordability assessment for you. Are you thinking of buying a home anytime soon? If so, to get ahead of the game, you could have an affordability assessment carried out before you start searching for properties. This would show you what sort of financial situation you are in before you start getting credit checks.
Providing evidence that you have kept on top of your mortgage and rent payments does not guarantee that you will pass a lenders own affordability test.
Each lender has their own strict lending criteria. Some are better than others depending on your personal and financial situation. Lenders want to attract good quality borrowers who may not fit their competitor’s criteria. They engage them by carving out niches for themselves. Here are some reasons why your mortgage application could be denied or has been denied for being outside of policy:
If you come to us, your local Mortgage Broker in Sheffield, we can find the best lender for you based on your personal situation. Even if you think your situation is a little complicated, don’t hesitate to get in touch. We have dealt with thousands of complex cases and we can’t wait to help you through yours. With our help at Sheffieldmoneyman combined with a perfectly matched lender, you will be able to put down a deposit for a mortgage in no time! Get in touch with a Mortgage Advisor in Sheffield and receive a free mortgage consultation today.
We have been in the mortgage business for a very long time now, it’s been ten years! Over these years, we have learnt how to help you get over almost every mortgage hurdle. Whatever your personal situation is, we have probably been faced with a similar situation. Just to list a couple, we offer First Time Buyer, Remortgage and even Self Employed Mortgage Advice in Sheffield.
Getting a mortgage can become complex very quickly. This is because there are thousands of different lenders out there who all have their own unique lending criteria. So, if you decide to go to a lender over a Mortgage Broker in Sheffield, like us, it could get be complicated and hard to get accepted a mortgage.
You’ll see that some lender’s credit scores are easier to pass than others. Different lenders like to focus on different parts of the market. You will find that lenders with the tightest lending criteria will supply the lowest rates. Also, it is common to find that customers do not match the criteria of every lender.
When a lender is offering a competitive deal, they will always have a tight margin. Firstly, they need to make sure that the customer will be able to afford a mortgage because at the end of day lenders want to make a profit and not end up losing money. This is why it can be hard to qualify with lenders who have tight criteria.
High street lenders who are offering the cheapest rates will always try and find other ways to increase their earnings from their borrowers. Once you have been accepted a mortgage, they will always try and sell you more of their products to try and gain even more profit. Their products will include Bank Accounts, unsecured loans, credit cards and Insurance.
However, mortgages with the lowest rates of interest often come with high set-up fees and that’s why people often stay away from these products. A lender will only think about their profit whereas as a Mortgage Broker in Sheffield will always have your best interests at heart. We know exactly what to do in order to save your time and your money, but we do this for you, recommending you the best deal available to you based on your individual circumstances.
You will find that not everyone can just remortgage elsewhere and this is down to different reasons:
Matching the lenders’ criteria, depending on how the economy is performing, can affect how easy or hard it is to get accepted a mortgage. If the economy is suffering, lenders will tighten the margins and vice versa when the economy is doing well. Depending on when you are applying, it can sometimes be hard to obtain a mortgage, yet previously, mid-2000’s, it was too easy. This was just before the credit crunch where lenders where stupidly granting mortgages to people who couldn’t even afford one.
After the credit crunch, lenders took a completely different view and tightened their criteria. You needed a 25% deposit which meant that getting on the property ladder was basically impossible. Interest rates began to rise, tempting customers to continue renting.
Being an expert Mortgage Broker in Sheffield has allowed us to gain valuable experience and deep insights into what lenders are looking for in mortgage applicants. We are referring to credit scoring, which most high street lenders do now to save them time and money and also produce consistent decisioning.
So, if you are finding it hard to match with lenders criteria it may be time to approach a Mortgage Broker. As a Mortgage Broker in Sheffield, we can share simple steps with you on how to improve your chances of your mortgage application being successful.
These steps are very easy and just by giving us a call, you could end up a step closer to securing a mortgage deal. We will take a look for you, all you need to do is get in touch, speak to an experienced Mortgage Advisor in Sheffield today.
First time buyers, home movers, landlords and the self employed will always ask the same question when it comes to applying for a mortgage – “how much can I borrow?”.
The answer varies depending on your individual situation. For example, how much you can borrow could change depending on your credit score, income, bank statements and your personal situation.
Let’s take a look into ‘how much you can borrow for a mortgage’ and how things have changed following the credit crunch.
Long before the credit crunch, credit scoring was non-existent and mortgages were manually assessed by your local building society manager. Then, during the 1990s, lenders started performing income assessments to provide a consistent approach across applicants.
Maximum lending caps were also introduced. This meant that customers couldn’t borrow more than three to four times their annual income. Scary to think that before people could!
Despite these lending caps in place, in the early 2000s, lender’s income multipliers grew more generous. This meant that more and more people were borrowing more than they can afford to pay back. Furthermore, some lenders were even allowing some of their customers to ‘self-certify’ their income with minimal/no background checks such as payslips.
Of course, all of this went very wrong. Lenders were lending to applicants that couldn’t afford to pay them back, therefore the market crashed and all of sudden, it became extremely hard to get a mortgage from 2008-2010. Lenders tightened their margins and created a cautious (over-corrected) lending environment.
In 2014, the Mortgage Market Review (MMR) was introduced. This initiative helped the market get back up on its feet; it brought a new set of guidelines for lenders to adhere to. The old income multiplier method was scrapped and replaced with new, more sophisticated affordability calculators.
These new affordability calculators provided a closer look into an applicant’s spending habits and net disposable income. This meant that the lender could have an in-depth look at your bank statements to ensure unaffordable mortgages were not granted as they were before the Mortgage Market Review.
There is still a “lending cap” in place at about 4.75 times your annual income but your expenditures are also analysed. For example, lenders seem to penalise low-earners and even things like gambling showing up on your bank statements can sometimes affect your chances of being accepted. Some take pension contributions as a fixed outgoing so would often lend, say a public sector worker with a big pension deduction less than a private sector and so on.
If you are currently trying to work out how much that you borrow, we would recommend trying our online free affordability calculator or speaking to us for a more accurate measure. A Mortgage Advisor in Sheffield will research the market on your behalf and try to find a lender that will lend you the amount you need.
Before you take out a mortgage you should sit down with a First Time Buyer Mortgage Advisor in Sheffield and work out your finances together to ensure that the repayments feel comfortable to you.