Property purchases are often heavy-duty expenses most buyers cannot afford to make multiple times in their lives. Such purchases require thorough inquiry, assessment, and financial management. Most homebuyers spend several years saving up for the deposits they pay to their mortgage lenders. They also spend a significant amount of time creating a favourable credit profile. If you wish to get your new house on a mortgage, you cannot take your finances lightly.
Here are a few ways in which you can get your finances in order before applying for a mortgage:
Stay away from payday loans
If you plan to purchase a property soon, it is better to stay away from payday loans. Most payday loans involve small sums of money lent at high interest rates, allowing borrowers to repay them from their wages. These high-interest unsecured loans can disrupt your budget and hamper your financial well-being. If you are incapable of paying these debts off, you can enter into a spiral of debt that will directly affect your credit profile while applying for a mortgage.
Calculate all expenses involved in getting a mortgage.
Apart from the market value of the property and the deposit needed by the lender, there are several expenses that go into getting a mortgage. From solicitor’s fees, valuation fees to arrangement fees and brokerage, make a list of all expenses you are likely to incur throughout the process of getting your mortgage and purchasing your property.
Of all these expenses, you can save up on your brokerage by working with fee-free mortgage brokers. These professionals do not charge a single penny for their services and help their clients meet the right lenders for free. Depending on your circumstances, your mortgage broker will scan the market and bring you the deals that best suit you. Make sure you find the best broker in the town you want to purchase your property in. For example, if you are looking for a property around you, find the Mortgage Broker near me has for you.
Minimise your existing debt.
Applying for a mortgage while carrying a heavy debt is never a good option. Even if you have a steady income and meet all other criteria put forward by a lender, they will hesitate before approving your mortgage application if you have a heavy debt. Before making your mortgage application, settle as many debts as possible. This will improve your credit score and help you secure the mortgage.
Get a gift (and not a loan) from your family members.
If your parents, grandparents, or other family members are helping you pay the deposit for a mortgage, make sure you take the sum as a gift and not a loan. This will help you in affordability assessment without adding a debt to your name. While you apply for a mortgage, ask your parent(s) or relative to give you letter mentioning that money is given you is a gift. They will also need to provide lenders with evidence of where the money is from, such as proof of bank transfer and/or bank statements.
Use your savings account to pay off debts
If you have an active current account and a savings account, it is advisable to use your savings account to pay off debts like credit card bills and loans. This will prevent lenders from considering these payments as committed expenses while assessing your affordability. It will keep your income intact and not allow your debt repayments to make any cuts therein.
Maximise verifiable income as a self-employed borrower
It is often more difficult for self-employed borrowers to get a suitable mortgage deal than salaried professionals. Mortgage lenders look for income stability, making self-employed borrowers risky. However, this does not mean that you will not get a good deal while being self-employed. Before you apply for a mortgage as a self-employed client, speak to your accountant for help to maximise your verifiable income. Along with this, make sure you have a clean and impressive credit profile to convince mortgage lenders as a self-employed borrower.
Focus on making a bigger deposit.
If you are planning to get a mortgage, your deposit will be the biggest expense you will incur toward purchasing your house. A bigger deposit will reduce your LTV (loan-to-value), giving you a better mortgage deal. In other words, a bigger deposit will make your mortgage lender feel more secure with you, motivating them to give you better deals. It will also reduce the amount you borrow from your lender, bringing your monthly repayments down.
Seek professional advice
Purchasing a property on a mortgage is a big deal and the process should not be hurried. Make sure you seek help from professionals like mortgage broker or mortgage advisor. They will help you manage your finances better and prepare you to get the best mortgage deal possible. As you work with these professionals, make sure you are honest in revealing matters related to your finances. This will allow them to navigate any problems you face with precision and get your mortgage application successfully approved. Some of them offer free mortgage advice without compressing the quality.