Landing a mortgage can be one of the most exciting milestones we’ll experience in our lifetime. There’s a lot to prep and jargon to bust, not to mention money to save.
Knowledge is most definitely power, but with so much information out there, it can be overwhelming to know which questions to ask.
To get some answers, we put mortgage questions from our Cosmopolitan Home Made housemates and Money Makeover Facebook group to mortgage advisor and expert Katie Crosby.
Here’s what you need to know before nailing your mortgage application.
“How should I prepare for a mortgage application?”
Before you even think about applying for a mortgage, you need to know where your financial history is at.
“I always ask my clients to get a copy of their credit report, which shows how well you repay debts. There are lots of credit reference agencies available to get your report, with many offering the service for free,” says Katie. Missed payments, such as phone bills or store cards, and student loans may show up on your record but may not negatively impact your credit rating, although they may be taken into account when you are assessed for affordability (how much you can afford to pay back per month).
“Generally, lenders will ask for three months of payslips and three months of bank statements, as well as proof of your deposit,” she adds.
While it can be difficult to collate all of these documents, the NatWest mortgage application is paperless, keeping all submitted and signed documents in one place, as well as an application tracker. You can also chat to a mortgage advisor online without leaving your bedroom, meaning mortgage advice can be just a few clicks away.
“Can I get a mortgage if I have County Court Judgements on my record?”
County Court Judgements, which can be issued if you have unpaid bills or fines, can affect your options, but they shouldn’t stop you from getting a mortgage if you show that you can rectify any issues. Your best option is to settle up any CCJs before applying for a mortgage, but if you can’t, there are options.
“Some lenders specialise in mortgages for clients who have had adverse credit in the past, so these could be a good option to look into. Interest rates, however, are generally higher from these lenders than your average high-street lenders would offer,” Katie says.
“What are the advantages of a 95% mortgage?”
The 95% mortgage has been hitting headlines lately, but we don’t blame you for wondering what it actually is and why it could be an option for you.
“The 95% mortgage is available on properties worth up to £600,000 and requires a smaller deposit (5%) than other mortgages. This is to address the problem many first-time buyers face of feeling that saving for a deposit is impossible while renting. A 95% mortgage allows people to get on the property ladder sooner and start paying into their own mortgage, rather than their landlord’s,” Katie adds.
If you’re looking to learn more about the 95% mortgage, check out NatWest’s handy guide here.
“My bank knows my financial history – should I still shop around for a mortgage?”
While loyalty might be an admirable trait in life, not so much in finance. “If you don’t meet their current mortgage criteria or affordability, the fact that you bank with them will make no difference. It’s always best to shop around to get the best rate for you. Using a mortgage broker who can access many different lenders and hundreds of different deals will often get you a much better deal.
“A broker will take your information and do all the searching and hard work for you, and will focus on applying for a mortgage that you are likely to be accepted for,” Katie adds.
“Is a fixed-term mortgage better than a variable option?”
When looking for mortgages, there are two types of rates to be aware of. A fixed-rate mortgage will stay at a set interest rate for the agreed period of time, which could be higher or lower than the Bank of England base interest rate. A variable mortgage will vary alongside this base rate.
“A fixed-rate mortgage is great as it allows you to budget accordingly for the set period of time. However, you are tied into that deal until it finishes. If you decide to leave that deal early, you will face an early repayment charge,” Katie warns.
“While you generally have a higher interest rate the longer you fix your mortgage for, you are paying for the long-term security of knowing that the rate of your mortgage repayments won’t shoot up for that fixed period of time.”
Next step: save those pennies and get a foot on the property ladder!
Ready to kickstart the process? NatWest could help you land your first home
95% Mortgages – Exclusions & eligibility criteria apply. Supported by the UK governments mortgage guarantee scheme
Your home may be repossessed if you do not keep up repayments on your mortgage
