Thinking of buying? Think finances first
Thu 05 Feb 2015
The completion of the Mortgage Market Review (MMR) saw changes to the lending market last year, including more stringent affordability checks on homebuyers looking to take out a mortgage. But even with these changes now in place, with the right planning and the right advice, purchasing a new home does not have to be a pipedream.
Unlike some brokers, Green & Co's financial services team have access to the whole of the mortgage market (except bridging loans) to make sure that we can offer the best product for your needs – backed up by the knowledge and expertise of experienced professionals.
With all the changes to the lending market in recent years, it is more important than ever that you seek professional advice from experienced, qualified and competent Mortgage Advisers.
Changes were introduced last year as a result of the MMR and for some people, especially those that haven’t moved in the last four or five years, the whole process has become unrecognisable.
As a result of the changes, homebuyers can expect to face tougher checks before being granted a mortgage and borrowing will be based on how much they have left after regular expenditure, rather than on their income. Lenders also have to check that people can still afford repayments if interest rates rise.
MMR has made it more difficult to get a mortgage because of the sheer amount of information you need to provide and the criteria that you must meet. However, it does not mean mortgages are unobtainable. Choose a broker that can offer whole-market lending which will inevitably give you an advantage and then you need to plan your finances more carefully and make sure it is affordable. Remember, your home is at risk if you do not keep up with repayments.
Our advice is to think about your finances as early as possible. You might even be 12 or 24 months away from buying a property, but if you can start to build your credit rating, cut out unnecessary spending and cancel those unused gym memberships for example, it will all help towards getting the mortgage in place to buy your first or next home.
Speaking to a professional such as our team of in-branch Mortgage Advisors should be the first thing you do when considering buying a home. In today’s market, this professional advice is the only real way of knowing exactly what you can and can’t do.
So what you can do to put yourself in a stronger position when the time comes to consider mortgages? The most important thing is to boost your credit score, which can be viewed on credit rating websites such as Experian or Equifax.
Credit rating is about trying to predict your future activity so if you have little credit history, it’s difficult for lenders to do that. Some people will pride themselves on having never borrowed from a bank, used a credit card or bought a big-ticket item on credit, but unfortunately it can work against them in the mortgage market. Others may have slipped on individual payments and don’t realise the affect one missed payment could have on future mortgage applications.
Either way it’s important to build your credit score, especially in light of the latest measures on lending. With the right planning and financial advice, your new home could be closer than you think.
Here are our five top tips to help boost your credit score:
- Use your credit card for regular purchases – one of the best ways to build or rebuild a credit score is to prove that you are reliable with payments. Use a credit card for small but regular payments (like topping up the car with petrol) and as long as you pay it off in full each month and don’t withdraw cash, you shouldn’t incur interest. After six months or so your credit score will start to improve.
- Register to vote – it might not be first on your list of priorities when you move into a new property but make sure you register to vote at www.gov.uk or it will affect your chances of getting a mortgage when you come to move again.
- Eliminate ‘nuisance balances’ – these are any credit cards that have sat in your wallet for years and have small but affordable balances on them. Pay them off, close the card and stick to one or two cards for purchases if you can.
- Check addresses on old accounts – if you have an old mobile phone contract or credit card which is still ‘open’ or active it will be taken into consideration in your credit score. However, if that account is registered to an old address it can be flagged as a discrepancy. Check your file and make sure addresses are up to date.
- Cancel unused store cards – many of us have store cards in the back of our purse or wallet, but if you don’t use them, get rid of them. This doesn’t include supermarket loyalty cards, only those which offer credit in stores.
Your home may be at risk if you do not keep up repayments on your mortgage or any other loans secured on it.
Green & Co will charge a fee of £125 for arranging your mortgage if it is a residential purchase and £175 if it is a buy-to-let or let-to-buy.
Barry Hunn, Financial Services Manager