Finance Expert Reveals £6.99 Trick To Increase Mortgage Acceptance Chances
- A mortgage affordability ‘stress test’ has recently been discarded by the Bank of England
- However prospective homeowners should still consider affordability criteria lenders are likely to analyse
- Finance Expert Tom Church reveals how to increase your mortgage acceptance chances
- Reveals tricks for presenting yourself as a reliable prospect for a home loan
- Hacks include a £20 credit builder and streamlining basic quality of living costs to £6.99
Prospective homeowners will no doubt have seen recent news that the Bank of England made the decision to remove the mortgage affordability ‘stress test’ which was implemented in 2014 in order to reduce a repeat of the risky lending which was more prevalent ahead of the 2007-8 financial crisis.
As the measure became active on 1st August, those saving for a home may be excitedly considering their improved chances of getting on the propety ladder. Finance Expert Tom Church, Co-Founder of money-saving community LatestDeals.co.uk, said: ‘Removing this affordability test will be seen by many as a step in the right direction considering the ongoing cost of living crisis, but it’s still wise to ensure you’re in the best position financially before applying for a home loan. The FCA outlines affordability criteria which lenders are likely to check, so it’s worth following the steps below to increase your chances of being seen as a reliable prospect for a home loan.’
Build Your Credit From £20 A Month To Indicate Consistent Repayments
One of the factors which go into assessing mortgage affordability is your credit score, and part of what creates a good score is your ability to remain consistent with repayments. If your credit score is poor or very poor, you may want to consider a credit builder tool. There are credit cards designed for this specific purpose, such as Aqua, or you could take out a loan with Loqbox and repay as little as £20 a month for 12 months, before getting your lump sum released again. The best part is, the repayments with Loqbox are reported to all 3 credit agencies - Experian, Equifax and TransUnion - so you know you’re improving your financial credibility across the board.
Don’t Be Afraid To Send A Notice Of Correction If Credit File Is Wrong
You may log into your credit file and notice that some information is incorrect. In some situations, credit bureaus can take a little while to update their information about you - for example, if you recently paid off a chunk of debt, you may not see a change to your available credit usage statistics for a month or so. However, if the error remains and you’re beginning to consider a home loan, you can write to the credit reference agency in question and ask for a ‘notice of correction’ to be added to your file.
Reduce Your Spending - Cut Down Entertainment Costs To £6.99
There may not be a ‘stress test’ any more, but lenders will still look at your affordability in detail, which includes the spending you incur to maintain your standard of living. These costs will include everything from debts, child maintenance and council tax to commuting costs, food, utility bills and ground rent. They will also look at the cost of personal goods, clothes, your TV license…every aspect of your spending will be scrutinized!
It might sound silly, but if you are signed up to 6 different streaming services, for example, this makes your monthly expenditure higher under what the FCA would likely describe as ‘basic quality of living costs’. Choose one entertainment platform and stick with it - so if you head home and only tend to watch Netflix, but you’re signed up to Prime Video, Discovery Plus, YouTube Premium and Hayu, make sure you’re only paying £6.99 for a Basic Netflix plan and be done with it. Make changes like these to streamline your spending across the board, and you’ll look more appealing to lenders.
Employ A Mortgage Broker For The Best Documentation
You may want to avoid additional costs when you’re in the process of applying for a mortgage, and while it’s true that employing a mortgage broker will incur fees, it will probably be worth it. This is because a mortgage broker knows how to prepare your documentation to improve your eligibility for a home loan. What’s more, as they work directly with lenders, they will have access to exclusive deals you wouldn’t be able to access otherwise.
Hang On To Your Current Job - Don’t Imply Financial Instability
Many mortgage lenders will require you to provide at least three to six months of payslips before they will approve an application. This situation is much easier if you stay in the same job. While your dream job may be calling, it may have to be put on hold if your dream home is also on the horizon. It’s possible to still get approved for a mortgage when you’ve just switched jobs, but it makes the paperwork more complicated - you will need to have details from both your old and new jobs. Plus, lenders can decline those who haven’t been with the same employer for at least one year. Other lenders may be stricter and require applicants to have remained in the same steady job for multiple years.
Consider An Offset Mortgage - Use Family Savings To Increase Affordability
The most common type of mortgage is a repayment mortgage, but it isn’t your only option. You could also go for an offset mortgage by linking a savings account to make your payments cheaper. Of course, this involves having a savings account with the same lender, so it limits your options when it comes to shopping for lenders. If the company behind your savings account has strict home loan affordability criteria, you’ll need to be able to jump through those hoops. However, it’s a good way to save interest on your mortgage debt as you can either pay off the debt earlier or pay less each month.
Stop Paying Bills Over The Phone - Set Up A Direct Debit
It may have become a routine to ring up your phone provider and pay the bill manually, especially if you haven’t been budgeting your money well and don’t know which day of the month you’ll have the cash available. However, actions like these can result in a decreased likelihood of mortgage acceptance, as you run the risk of accidentally missing a payment and having a default or missed payment showing up on your credit file. This is the last thing you want when you’re trying to indicate financial stability to a mortgage lender! Therefore, setting up Direct Debits and a monthly budget will increase your mortgage acceptance chances - as well as give you some peace of mind.
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