5. Boost your chances of getting the best mortgage deal
The criteria for borrowing money has never been so tight, as today’s lenders want to be absolutely positive of your affordability and background before they agree to give you any sort of loan, especially if it’s for a mortgage.
There are many ways to shape up your profile, show your reliability and improve your chances of getting the best mortgage.
Find out how to boost your chances of getting the best mortgage deal.
1. Improve your credit score
You can improve your credit score by doing the following:
Prove residency by getting on the electoral roll (go to www.gov.uk/register-to-vote).
Foreign nationals can add a note on their credit profile stating their address/residency.
Check your current credit score file from all three credit agencies. Equifax, Experian and CheckMyFile.
Lenders use the combined average of these scores to represent you so it’s important to gather all three. And they’re also free.
If a credit agency tries to charge you for getting your report, don’t use it as these only show slight indications.
Check through your file for any mistakes. If you find an error, ask your lender to correct it. If the lender doesn’t remove the error, you can add a ‘notice of correction’ to your file - explaining the circumstances and why it’s unfair not to remove it. If the agency won’t help you, contact the Financial Ombudsman (UK & NI) who will process your complaint.
Check all addresses on your file even if it’s an old account or a contract you don’t use anymore. Lenders will worry over small, unusual details like this. Forgetting to update addresses could risk the acceptance of your application.
Breakup with past finances. Did you share a house at University? Live with your Ex? Then there’s a chance your old roomie’s credit score might be affecting yours today.
You need to contact any credit agencies you linked up with and ask to be ‘de-linked’ from them. This will stop any affiliation of their credit history and your application.
Build and Re-build your credit score. Do you currently have bad credit? Check out Money Advice’s blog on how to rebuild it, including using a Credit Builder Card.
You can start to build your credit score by using credit (getting a credit card or a loan) and paying it back responsibly. Read Experian’s report on How to Build Credit.
Time your application to your advantage. Unpaid bills and previous court judgments can get wiped from your record after 6 years. So you could wait until these have cleared to boost your chance of getting the best mortgage deal.
Pay everything on time. If you can, don’t miss any payments. You will really boost your chances of getting the best mortgage deal.
Set up a direct debit to make minimum credit card repayments on time every month. You can always pay more when possible - this looks good on an application!
Keep your eye on the prize. In the leading months, focus your attention on only one application - your mortgage deal. All applications go on your credit file so it would be sensible to space these out when you’re applying for a mortgage deal. Otherwise, you risk your application appearing irresponsible as you search for credit quickly.
Never withdraw cash on your credit card. Only live within your budget, remember your credit card is only there to show you’re responsible. Withdrawing cash is noted on your credit file and it’s expensive to do so. Avoid this at all costs!
Don’t reapply if you’ve just been rejected. Check your file for any errors before applying again. Rejections affect your credit rating so apply with care.
2. Prove Your Affordability
Lenders want to see polished details of affordability before they accept any deals. Follow these steps to prove your affordability and boost your chances of getting the best mortgage deal.
Use a broker to find the right deal for you. They have information that the public doesn’t see e.g. the lender’s credit and affordability criteria, so they will help match you up quicker than you going at it alone. Using a broker can also get your application accepted easier and quicken up the whole process.
Read our blog on Questions to ask your Mortgage Broker.
Get proof of your income because lenders need evidence. Previous bank statements and payslips work, look at the last three months. You’ll also want to make sure that the money going into your account matches up with the outgoings you’ve described e.g. car insurance, phone bill.
Inspect your bank statements, thoroughly. Ask yourself, “Is there anything on here that could be seen as a red flag to my lender?” Overdrawn charges and overdrafts can be ‘dealbreakers’. Check your list of outgoings against your bank statement, as these will have to line up.
Prepare to explain any unusual activity to your lender. They’ll want to know the reason for unidentified direct debits or standing orders to your Mum. Your application can be rejected if you fail to provide a reason.
Draw up your Disposable Income. This is the amount of money you have left at the end of each month. The bigger the figure, the more likely a lender is to see your affordability and get you the best deal.
Minimize your expenditure for at least three months before you apply for your deal. This will boost your disposable income and clearly show it on bank statements. ‘Fine tooth comb’ your bank statements to identify where you can cut costs. Maybe make your coffee and lunch from home instead of buying it from a shop when you’re out, cut down on petrol and walk or cycle more - this style of thinking is key to cutting costs.
Ensure you’re ‘Stress Test’ approved. Lenders will stress test your affordability to make sure your disposable income is enough to cover your best deal mortgage if rates were to jump up 7-8%. Try this Mortgage Rate Calculator.
3. More tips to boost your chances of snagging the best mortgage deal
An extra £100 can boost your acceptability. This means you can reduce the amount you need to borrow by 0.1% and cuts paperwork for the lender. An extra £100 on your deposit can speed up your application process with ease.
Overdraft? Never heard of it. Keep out of your overdraft. It’s known that lenders see those who ‘live close to the edge’ of their overdraft limit as financial risks and this can provide enough reason to reject an application. Try not to use it if you want to boost your chances of getting the best deal.
If you can get out of your overdraft - do. Some lenders don’t even like to see any overdraft availability on accounts within the last three months prior to an application. If you have an overdraft with a credit card, you can look into 0% Money Transfer Cards here.
Avoid PayDay Loans. They show poor money management and have extremely high-interest rates. Lenders will most likely reject your application if you have a PayDay loan.
Terminate your unused credit cards. If everything’s paid off and you’ve researched the fine print of closing credit cards. There’s no need to have credit waiting around ready to be used on a ‘whim’. Do make sure to complete your research as different credit cards can have their own effect if closed.
Use your savings to reduce the amount of loan needed and reduce your monthly repayments.