With the UK property market now entering its busiest period of the year, leading property finance specialists, One77 Mortgages, has chalked down some top tips for homebuyers when it comes to securing the best deal on a mortgage.
While the affordability of mortgage products remains at almost record lows, there are still plenty of ways to make your mortgage even more cost-effective, although your broker might not always disclose these methods.
While some tips will save you money from the get-go, it really is a case of spending money to make money with some of the others. When combined they should place you in the best position when buying in the current market.
More often than not, increasing your deposit by just a small amount can boost you into the next Loan to Value band, meaning a better rate and even potentially less onerous credit scores with lenders. Always work on 5% increments as these are where the best deals are for your price band so based on the current average house price, rather than borrowing 9% (£20,533), stretching the additional few thousand more to a 10% deposit of £22,815 will be far more beneficial in the long run.
Seek a no-fee mortgage broker
Pretty simple but many of us fail to do it. All brokers are paid commission on the product they sell you, but around 80% will also charge an additional fee - typically £500. May seem minute in the grand scheme of buying a house, but it all adds up.
Don’t restrict your options
It’s common knowledge that your bank isn’t the best place to start as they only offer their rates and products. But you would be surprised as to how many brokers and advisers can only offer products from a restricted panel of lenders. As a customer, this means you are missing out on potentially the best deal for you so make sure your broker has access to the entire marketplace.
Get your personal details in order
Such a simple one, but if you’ve failed to update documents to your married name, or you aren’t registered to your current home address, the lender’s computer will literally say no as it won’t be able to find you. This is a shortcut route to having your application declined.
Once your details are correctly registered, register for the electoral roll. You might not know it, but this has a huge bearing on the scoring system of lenders credit. If you aren’t registered it’s another minor little detail that can see you fall at the first hurdle of a mortgage application.
Forward your post!
The £60 it costs to have your mail forwarded for a year will be the best money you’ve ever spent without even realising it. This doesn’t necessarily apply to your mortgage but it will save you money. All too often a client moves house and ended up with a default notice on their phone bill or credit card as they’ve not received the reminder and forgot to pay it.
With the cost required to get on the ladder, many of us can be forgiven for skipping the add ons a broker may suggest. If there’s one cost you don’t want to skip on, it’s life cover. Understandably, many of us today can only get on the ladder with the help of our partners as a joint income is required. However, if the worst were to happen and illness or even death strikes, the lack of any form of protection cover can result in the whole deck of cards coming crashing down immediately. This is the last thing you need in this situation, so make sure your life cover is in place and up to date.
Again, sounds obvious right? But many of us plod along without even considering it. If your mortgage product allows overpayments - make them! You would be surprised at how much even a small overpayment can make on a monthly basis when it comes to the total interest over the lifetime term of your mortgage.
Lock it in
We’re currently in the middle of an artificially low, interest rate cycle and mortgage product affordability is close to record lows. Great news but make sure you lock in on a fixed rate mortgage to make the best of the current climate. A longer term of a fixed five-year rate is probably the best option however a three year fixed might be a happy middle ground for many between a two and five-year product. However, be aware of any 10 year plus fixed rate products. The fee might be great but over the years we’ve seen best-laid plans fall by the wayside and clients are then hit with huge early exit fees if they need to move or pay their mortgage early.
Any overtime worked can be beneficial towards mortgage eligibility but try and ensure that this overtime is consistent as possible. If there are drastic swings in the hours worked, lenders will often work from the lowest figure when deciding your position in the market.
Knock them down
It’s a buyers market at the moment and if you have the confidence, income and deposit, now is the time to get a great deal on a property by negotiating as hard as you can. As many buyers remain sitting on the fence, sellers are having to adjust their price expectations and the best way to reduce your mortgage costs are to get the property you want for a lower price in the first place! The average reduction is about 10% of the asking price, so use this as a benchmark and push for 15% or more.
If you’re looking to buy right now and your credit score is no good, then you’ve probably already had a few lenders slam the door in your face. Your credit score is everything to a lender in this day and age and poor payment history or a low score will put you at a severe disadvantage from the offset. Do all you can to cultivate a healthy score starting now and as most lenders base their judgement on Experian, it’s worth the small investment to make sure your reading from the same hymn sheet rather than one of the free credit score providers.
Also, know the implications of your deposit/credit score mix. A much smaller deposit will require an almost impeccable credit score. While a poor score doesn’t necessarily mean you won’t get a mortgage, you will struggle to achieve ‘high street’ rates but a good broker, like One77, should be able to help you find a product.
Managing Director of One77 Mortgages, Alastair McKee, commented: “The mortgage market can be a minefield of jargon, small print clauses and confusing figures, and so it’s no surprise that for many homebuyers and first-time buyers, in particular, the mortgage product they opt for isn’t always the best suited for their situation.
"But with a little bit of research, there are plenty of things you can do to secure a much better deal and make your mortgage work for you, not the other way around.
"Even the smallest things such as the electoral roll or having your documents correctly registered can influence a lenders decision and while we’re currently enjoying a period of great mortgage affordability, this doesn’t automatically mean you will be accepted.”