Expert Eye

How to prepare for a mortgage application?

The last 12 months have seen significant changes in the mortgage market.

It’s quite hard to comment on the current market as changes are happening so quickly – we’ve experienced rates being pulled overnight and lenders rates fluctuating week by week. Navigating through the mortgage market can be quite challenging if you’re not very experienced.

Additionally, you may find it disheartening that you’ve been declined by a lender or are unable to borrow as much as you thought. However, with many lenders specialising in different areas, knowing which lenders to approach who will match your requirements and needs can make all the difference. As well as submitting supporting paperwork that meets the lender’s lending criteria.

How can business owners prepare for a residential mortgage application?

Those who are self employed will be assessed on net profits, not turnover and if you chose to legally minimise declared profits to pay less tax, you could find it harder to get a mortgage. Company Directors’ affordability will generally be assessed based upon their declared salary and dividends, however certain lenders may be able to use the company’s profit and directors salary as proof of affordability along with supporting evidence in the form of 12 months of company accounts.

You may need to provide Company Accounts and/or Tax Returns as evidence of income for your mortgage application. For Company accounts, it would be preferable to show two to three years of accounts, usually signed off by a charted or certified accountant. For Tax Returns, you might be asked to provide two years of tax calculations and tax year overview forms.

You can also use different forms of income as well such as pension income, investment dividends and Government benefits.

What about remortgaging – can it save you money?

If you’re experiencing increasing monthly mortgage payments, that may be because you’re on a tracker mortgage, discount mortgage or a standard variable product. As the base rates changes, your monthly repayments will reflect the change. Therefore, to avoid any further increases, you can look at securing a fixed rate which will stay the same regardless of what happens with the Base Rate. You should be aware that if you’re on a tracker or discount mortgage, you may be faced with early repayment charges. In some cases if you have a high early repayment charge, you may end up being worse off switching to a fixed rate product.

Individuals who have 12 to 18 months left on their current fixed mortgage should check their paperwork to see what their current rate is and what their early repayment charge may be. Again, if you have high early repayment charges, it is most likely not worth moving before your current deal is due to end as you’ll probably be paying more than you’re actually saving.

However, you can look to secure a new fixed mortgage product, potentially up to 6 months before your current ends. This means that you can lock in at today’s rate, an opportunity to avoid any future rate increases, whilst if rates fall you can secure a lower rate than you have already.

As a mortgage is secured against your home or property it could be repossessed if you do not keep up the mortgage repayments. The purpose of this article is to provide technical and generic guidance and should not be interpreted as a personal recommendation or advice.

_ Amplo Mortgages & Financial Solutions is an award winning mortgage broker based in Cheshire, advising on residential, buy to let and commercial mortgages & protection insurance; renowned for providing solutions that other brokers often cannot see. Call 01270 443510 or make an enquiry online: amplomortgages.co.uk Amplo Group is the parent company to Amplo Mortgages & Financial Solutions.