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Celebrating 13 Years of Mortgage Light
13 years of helping clients buy new build properties
2024 marks 13 years since the Mortgage Light vision was realised by founder and director, Siobhan Holbrook.
Since its humble beginnings in 2011, the company has grown significantly from a 1-person business to a company that employs around 25 people. Siobhan’s business began in a small office in a local estate agency, and she quickly realised that her ability to understand the challenges that home-buyers faced, plus her experience from working in sales, enabled her to learn how to overcome objectives and the importance of relationships. She used these skills to cultivate connections with banks and building societies to get mortgage cases approved outside of policy, whilst helping her clients to understand the properties that suited their needs.
More than a decade later and the company has become a regionally recognised mortgage brokerage, whose reputation is trusted by lenders, developers, housing associations and returning customers alike. In fact, Mortgage Light has attracted over 1,153 4.9-star customer reviews, with 80% of clients returning for a remortgage.
Here, Siobhan answers some key questions on how Mortgage Light started and how the company helps people wanting to buy a new build property.
What sparked your interest in this industry and led you to set up Mortgage Light?
“Even in my earlier career as an estate agent, I really enjoyed helping people find their new home, whether being a family or moving out of home for the first time. At the time I thought the idea of home ownership was for the rich – or those really good at Monopoly! But building relationships with people and builders showed me how anybody can find a home. The only bit I needed to learn was mortgages, which I felt offered me more of a career; and this is the reason I took the plunge at 24.
I always presumed mortgages were complicated, however I realised it was just a case of understanding that it was another product tailored to the customer’s needs. In estate agency I enjoyed finding ‘the home’ for my customers. This feeling of satisfaction continued when I started in the mortgage world because I was helping people to actually buy the home. My sister has always said to me that she’s never known someone enjoy their job so much, but for me, working with all parties within the house buying process is an addiction for creating happiness for those looking to move!
I have always been passionate about home ownership and ensuring that everyone understands how to buy a home, no matter what their circumstances. The name Mortgage Light was created to reflect my company’s ethos; that we explain all mortgage terminology clearly and without complicated jargon, ultimately ensuring that the ability to buy a home is accessible for anyone and everyone.”
What would you say sets your company apart from your competitors?
“When I first started my business, I was acutely aware of the challenges small business owners had, compounded with imposter syndrome; I didn’t even know if Mortgage Light was going to be successful. However, I’ve always had a clear vision of the type of service I wanted to offer people. In the two years running up to becoming a mortgage adviser I developed the skills for structuring deals. This meant when clients came to me, not only was I able to look at a vast range of mortgage product offerings, I was also able to use a builder’s incentives to help them get a home which they may not have felt was possible. My experience allowed me to build confidence with my customer in buying off plan, which can be a daunting process. But by walking around plots with my client and understanding the builders’ specification I was able to help them to visualise their home.
Banks and building societies now come to Mortgage Light to ask us what is needed in the marketplace as currently they are changing criteria to make sure their sales targets are met. We’ve been instrumental in providing feedback on the type of mortgage products our clients need. Furthermore, because of our ability to get to know and understand our clients, we have been successful in placing cases outside of policy due to our reputation.”
What are the latest challenges that you hear customers experiencing and how do you think mortgage advisors can tackle them?
“At the moment it is evident clients are struggling with affordability. At Mortgage Light we take time to bespoke individual advice to our client. This could even mean recommending they look for another job if they’ve been in the same one for a while. This may seem a little radical, but in actual fact when we compare them against other people in the same position, we are able to highlight to them that others are getting paid more. We also give our clients confidence in approaching their employer to ask for pay rises – both these things tackle affordability issues and our advice is always appreciated by the client! Other solutions can be found within mortgage products which use family members to assist with affordability or to overcome issues around deposit. We also have a lender that will accept income from someone residing in the applicant’s home and paying ‘keep’.
A good mortgage advisor listens to the client and offers them several solutions and then guides them on the most viable option for them.”
When it comes to buying a new build, what advice can you offer to first time buyers looking for their first mortgage?
“Buying a new build is an extremely exciting process and it’s easy to get carried away! I believe it’s important when purchasing from a builder that you take time to understand the specification that you are getting from the builder. For instance, some back gardens don’t have turf as standard so it’s always best to take a step back and check if you’re not sure about something. In conjunction with this, builders have the ability to offer incentives. By structuring these, it could mean cheaper interest rates and subsequently lower monthly payments. This, coupled with lower running costs, means new build purchases are an extremely attractive proposition for buyers. I advise people to just take their time – not only to understand the home they’re buying, but also the site plan and its surroundings, and always take a moment to consider the deal which best suit your needs.”
How can mortgage advisors ensure that they protect their customers once they have secured a mortgage?
“It’s all about being transparent and giving clear and knowledgeable advice. For instance, once we’ve secured a mortgage offer for a client we will always talk to them about the benefits of protecting their investment, so life insurance, critical illness and income protection. But being a broker isn’t just about offering financial services; we support each home-buyer through the whole process, advising on things like how to keep their credit file in the best possible shape. We build strong bonds and our retention rate is really good – in fact 80% of our clients remortgage with us!”
Why would you recommend that buyers use a mortgage broker as opposed to a bank?
“Mortgage brokers have an understanding not only of the mortgage market but also the house buying process. They often have their finger on the pulse on what’s happening in the housing market and even if there’s an opportunity to negotiate. A competent broker is a valuable asset; they have a vested interest in looking after you properly and they should be there for all your mortgage needs for now and in the future. A mortgage advisor will tailor mortgage advice to suit your current situation and guide you for situations in the future, whereas a bank will treat you like a transaction and tell you about mortgage products from a screen.”
What do you think are the keys to being a successful mortgage broker?
“It’s always been important to me to ensure each and every client gets the best possible mortgage product with minimal stress and delay. I’ve trained all the brokers that work at my firm to overcome the word ‘no’ and help find a solution for customers. A client is never just another number. I feel strongly about getting to know each and every one; their motivations and their insecurities. My team take a genuine interest in getting to know each person and ensure the mortgage advice is tailored to their needs.”
Any final comments/advice to those looking to secure a mortgage to buy a new build property?
“It’s so important when buying a home that you enjoy the journey and don’t rush. When you find the new build house you’d like to buy, the feeling is amazing! A builder is a business and will want to sell to you, therefore the risk of the chain falling apart is small. In conjunction with this, if you have the opportunity of buying early enough, you get to bespoke the house to suit your taste with things like wall tiles and kitchen unit colours. You even get a home demo on how to use your house, which is especially useful for a first-time buyer as you don’t always know where the electric or gas metre is. The purchase price may be slightly more expensive than the second-hand market, however it’s worth considering that there are things that you won’t need to spend money on. For example, you won’t need to decorate and often you can structure a deal where appliances are already installed. The other big advantage of buying new is the running cost which tends to be lower, so that’s always going to be a bonus. Home buying can be a stressful process but when buying new it’s made a little bit easier. Many people find that once they’ve bought a new-build home, they’ll never go back to buying second-hand!”
For free mortgage advice, give our friendly team a call on 01908 597655.
How to Get a Mortgage on a Low Income
If your income is below the national average (which currently sits at around £31,772 per year), then buying a house and taking on a mortgage which may run for the next 25 years or more, may feel like a pretty daunting financial commitment. Having a low income can make getting a mortgage large enough to buy a reasonable property a challenge. But it certainly isn’t impossible and it doesn’t have to be scary!
The level of your annual income is one of the most important factors in your mortgage application. It’s a major driver for a lender in their assessment of the mortgage they might be comfortable in offering to you. Lenders will look at your income because this is ultimately what will be used to repay what you’ve borrowed and meet your monthly mortgage repayments.
If I have a low income, will I struggle to get a mortgage?
If you have a low income it doesn’t necessarily mean you’ll struggle to find a lender who’ll offer you an affordable mortgage. By using an experienced mortgage broker or adviser you will have the best chance of finding the right mortgage for you.
How will a lender assess my mortgage application?
Firstly, let’s explain a little about how lenders generally assess mortgage applications. Whilst it’s true that most lenders will assess each mortgage application on a case-by-case basis, most of them will also have a set of basic lending criteria that they will apply as an initial assessment of a borrower’s affordability and suitability. This often includes an income multiplier. This helps to determine the maximum level of lending that they are willing to advance to an applicant.
Alongside your income, a lender will also want to look at your outgoings. This includes things like bills, food and travel costs. Lenders may also want to try to ‘futureproof’ your application. They do this by considering how you’d manage if interest rates were to rise or if you were to have a change in personal circumstances, such as starting a family for instance. Would you still be able to meet the monthly mortgage repayments?
In addition to the above, mortgage lenders will also consider:
- The size of your cash deposit
- Any savings you may have available as a safety net
- Your credit history
- The type and condition of the property you wish to purchase
Don’t feel discouraged by the lack of size of your income when looking for a mortgage. There are a number of options available to those on a low income which might help you secure the property you are after. Let’s look at a few of those options now.
Apply for a joint mortgage
Arguably, the easiest way to get a higher mortgage offer when you are on a low income is to apply for a joint mortgage with somebody else. This could be a partner, friend or a family member. Remember, however, that buying a house and taking out a mortgage is a legal contract and a long-term commitment. Consider very carefully who you enter into a joint mortgage with.
A joint mortgage allows you to borrow money jointly with another person. This means you not only share living costs, making the mortgage more affordable, but it means that there are two incomes coming into the household from a mortgage assessment point of view. This means that you will be able to borrow more. When you purchase a property with someone else, you will be joint owners with a legal claim to the ownership of the property. You will also both be liable for the entire mortgage and its monthly repayments.
With a joint mortgage application, lenders will take into consideration both applicants’ incomes in their income multiplier. So, let’s say that you both earn £18,000. The level of mortgage will be based on a joint income of £36,000. Using a 4.5x income multiplier, this could generate a mortgage up to £162,000. Combining incomes not only helps make the cost of owning a house more affordable and therefore helps you get accepted, but it could also secure you a much larger mortgage offer.
Find out more – ‘How do joint mortgages work?’
Put down a large deposit
Easier said than done, we know. If you are on a low income, how are you meant to put down a large deposit? Well, perhaps you have inherited enough money to be able to do this. Perhaps you are lucky enough to have some help from your parents. In fact, The Bank of Mum & Dad is up there amongst the most common ways that first-time buyers raise a house deposit.
Whilst it’s possible to use cash from a loan to put towards your deposit, our advice would be to use this option wisely. It’s important to be sure you’re able to afford the loan payments together with your mortgage repayments and other outgoings. You should also be mindful that the mortgage lender will take the loan into account when considering your affordability for the mortgage.
Maybe combining your savings with someone else and applying for a joint mortgage will help achieve the strongest application.
Your deposit will form a percentage of the purchase price of the property that you are buying. You will then need a mortgage to cover the remainder of the purchase price.
Let us explain; if the property you want to buy is £180,000 and you put down a deposit of £18,000, your deposit will be 10% of the property value, meaning you’ll need a mortgage for the 90% which would be £162,000.
Ultimately, a larger deposit should bring your mortgage borrowing and therefore your monthly repayments down. A deposit of between 10-20% is considered a good-sized deposit. 20%+ is considered to be a large deposit and will unlock better mortgage deals with lower interest rates.
Find out more – ‘What is the minimum deposit on a mortgage?’ & ‘How to save for a house deposit’
Improve your credit score
Alongside your income details, your personal credit score is another major factor that lenders will take into consideration when assessing your mortgage application. It could influence the type and size of any deals they may offer you. Looking into your credit history is one of the ways in which a lender will gain information on how reliable you have been at paying back loans and borrowing in the past.
If you have borrowed money in the past and kept up with repayments, then you’re likely to have a good credit history. Having ‘good’ credit is a sign that a creditor can trust you. This will generally work in your favour. On the other hand, ‘bad’ credit could signal a history of missing or late repayments. This will serve as a warning to potential lenders. Bad credit coupled with a low income is likely to make it much more difficult to get accepted for the mortgage you want.
It’s good practice to find out your credit score ahead of applying for a mortgage. That way, you’ll have a good picture of how a lender is likely to view you as a potential customer. Find out more on the Experian website.
If you have never borrowed money previously and therefore do not have a credit history, then this can also present a challenge. It gives lenders nothing to go on. Therefore, they can’t be sure whether you are a responsible borrower or not. As a consequence, they are likely to take a cautious approach to your application.
Prior to applying for a mortgage, it’s a good idea to build up some level of good credit history. Perhaps take out a credit card with a small limit and use it fairly regularly. Ensure that you keep on top of repayments and ideally repay the balance in full each month. This will demonstrate that you are financially responsible and will help to build a positive credit score or improve a previously poor credit score.
Find out more – ‘How does bad credit affect a mortgage?’
Use a mortgage guarantor
If you know someone who is willing to be a mortgage guarantor for you, then this could be a helping hand in getting a mortgage on a low income. A mortgage guarantor is usually a parent or close family member who takes on some of the mortgage risk by acting as a safety net for your borrowing.
A mortgage guarantor must meet the eligibility criteria of the lender. They must also have sufficient disposable income available to cover your monthly mortgage commitment and/or have cash savings or equity in property available to offer as security in case you default.
Essentially, a mortgage guarantor may provide comfort to a lender. If you are unable to make the mortgage repayments, there is someone else that they can rely on to make these for you. Just be aware that not all lenders accept guarantor mortgages. And of course, being a mortgage guarantor is no small matter. It’s a big commitment and a legal tie.
Find out more – ‘What is a mortgage guarantor?’
Use a government scheme
It’s no secret that getting on the property ladder can be difficult – especially for those on a low income. The good news is that there is help out there for those who would like to utilise it. The government run a number of schemes that make purchasing a home that little bit easier.
Help to Buy
Let’s first talk about Help to Buy. Exclusive to first-time buyers, when using this scheme you are given an equity loan from the government to put towards the cost of a new build home (up to 20% of the property price). As a result, you will only need to provide a 5% cash deposit, which means lower upfront costs. There is no interest to pay on your equity loan for the first five years and you are likely to qualify for a wider range of mortgage deals with cheaper rates as your mortgage borrowing is likely to be sub 80% of the property value and therefore less of a risk to the lender.
It’s important to note that you will be limited by the price cap in your region. This means that you can only use the scheme to purchase a home costing no more than the specified property price cap in your region. This is in place to ensure that the scheme reaches the people who need it most. You can view the property price caps in your region here. This scheme will end in December so submissions will only be accepted up to the end of October.
Shared ownership
The shared ownership scheme is the most popular of the government schemes designed to help people get on the property ladder. When you utilise the shared ownership scheme, you purchase a share of a property. The remaining proportion is retained by a Housing Association which then charges you monthly rent. It’s essentially a cross between buying and renting.
By purchasing a share of a property (typically between 30-50%), your deposit and your mortgage borrowing (and therefore repayments) will be much smaller than if you had purchased 100% of the property. Additionally, the rent you’ll be charged is typically less than the rate charged on the traditional rental market. It’s important to note that because you won’t own 100% of the property, you may encounter a few restrictions when it comes to some home improvements. Essentially, you are a tenant when you live in a shared ownership property. This could mean that in the very worst of cases, you might even be evicted if you fail to pay the rent, for instance.
Over time, you can follow the process of ‘staircasing’. This allows you to purchase further shares in the property and, eventually perhaps, reach 100% ownership. If you reach 100% ownership, you will no longer pay rent to the Housing Association.
Staircasing can be an expensive process, however. This is because you will need to get your house valued each time you do it. This incurs a valuation fee. You will have some legal expenses to pay as you’ll need to involve a solicitor. You may also incur some mortgage fees each time you rearrange your mortgage.
Find out more – ‘Is there a minimum income for shared ownership?’ & ‘Shared ownership – how does staircasing work?’
Mortgage Guarantee Scheme
A fairly new government-backed scheme, the Mortgage Guarantee Scheme is also known as the 5% mortgage scheme. It allows first-time buyers, home movers and previous homeowners to get a 95% loan-to-value mortgage. This means that you will only need to put down a 5% deposit on a property.
Ordinarily, the majority of lenders require a minimum of 10% for a house deposit. With the Covid-19 pandemic and the cost of living making raising deposits much harder for people all around the country, this scheme has been temporarily introduced to offer the opportunity to purchase a property with a much smaller deposit. This scheme is running until December 31st 2022 and is only available amongst participating lenders.
Use a mortgage adviser and broker
Lastly, if you are looking to get a mortgage on a low income, we would strongly advise you to use a mortgage adviser and broker to help you navigate the mortgage market. At Mortgage Light, we’ve helped people with all kinds of different financial situations secure the mortgage that they need.
Using a mortgage adviser and broker also significantly decreases your chances of getting rejected by a lender. No one likes getting rejected, but having a mortgage application rejected could actually set you back in the long run.
This is because each mortgage application will leave a hard search on your credit report. Having multiple hard searches in a short space of time can be an indication that you are relying on credit, having financial issues or your application has been rejected by other lenders. This could well be a red flag for any mortgage lender that you apply to. It signals that you may be a high-risk applicant.
Rest assured it is possible to get a mortgage on a low income. However, it may require a little forethought and planning. It’s all about finding the most suitable lenders and making your application the most attractive it can be.
Of course, this can be tricky to do alone. The Mortgage Light team are on hand to help you when you are ready to start exploring this exciting next milestone in your life! Our advisers are just a phone call away with plenty of friendly advice to offer. Give us a call on 01908 597655 or contact us via our website.
5 Reasons to use a Mortgage Adviser
Let’s face it – the mortgage market can feel pretty daunting. If you don’t know exactly what you’re doing (and most people don’t), then all the different lenders, deals and jargon can make your head spin! This is exactly why mortgage advisers exist – it’s because mortgages can be complex and people need help navigating them.
Whilst you could go directly to one of the lenders you already know when you are looking for a mortgage, you’d be significantly restricting your options if you did. Lenders will only be able to advise you on their own products. There’s a huge selection of mortgages out there – but how do you know which one is right for you?
That’s where a mortgage adviser comes in. We can help you navigate the mortgage market and select the best mortgage deals for your circumstances.
If you’re wondering exactly what a mortgage adviser can do for you, here are 5 of the main reasons we recommend using one:
We save you time
It is quite possible for you to search the mortgage market yourself. You can compare different deals and then organise your own mortgage application. However, it can be rather time-consuming and a little confusing. You need to know what you’re looking for, as well as how to make accurate comparisons between one deal and another. That’s why we’re here.
Using a mortgage adviser will save you a huge amount of time doing research. We’ll help to highlight what is important to you in a mortgage. We’ll be able to explain the different options to you in straightforward terms. Through discussion with you, we’ll narrow down those options to a simple choice.
As part of our service, we scour the whole of the mortgage market for the best deals for you. We have access to exclusive deals that consumers cannot access directly themselves. We’ll work with you to collate all the documents you’re going to need, such as pay slips, bank statements and photo ID. Then, we speak to lenders on your behalf, ultimately submitting and managing your application until you secure an offer. We can even liaise with your solicitor on mortgage-related matters.
Not only that, but because this is our job and we know the house buying process inside out, we can move through it quickly. This means that you will get your mortgage offer fast which could help you secure the property you are after. Given the property market is currently a seller’s market, being able to move quickly can make all the difference between having an offer accepted or losing a property. At Mortgage Light, we aim for all mortgage offers to be issued within 7-14 working days, as long as we have all the requested documentation from you.
We save you money
Buying a property is a very costly business. The great thing about using a mortgage adviser is that we can help to save you money. Our knowledge and experience can help you avoid making costly mistakes. An important part of our role is to find you the most appropriate mortgage deal for your circumstances. One that’s not going to cost you unnecessary money in the long run.
As we mentioned previously, we often have access to a range of deals that aren’t available directly to consumers. That is because at Mortgage Light, we’re recognised by banks and building societies as providing a valued service in the way we package and present deals for them. This means that we’re able to offer bespoke products that aren’t always accessible elsewhere. This allows us to potentially secure you an exclusive deal that just wouldn’t have otherwise been possible!
We’ll also take all the costs and features of a mortgage into account when finding you the cheapest and most suitable deal. We don’t just compare interest rates. We take into account fees, such as arrangement fees, booking fees and deal breakage fees in case you need to move to a new property. Being unaware of such fees and restrictions can be a pitfall for many people who search for a mortgage themselves.
We can also explain to you just how much impact a small difference in interest rate can have over the length of a mortgage term. For example, let’s say you take out a £300,000 mortgage over 25 years at an interest rate of 2%. You’d pay £1,271.56 per month in mortgage repayments and pay £81,468.90 in interest across the whole mortgage term. If that interest rate was to increase by just 1% to 3%, your monthly mortgage repayments would increase by £151.07 per month and you’d pay an additional £45,321.28 in interest over the same 25-year term.
Find out more – ‘How much interest am I paying on my mortgage?’
We’re experts
Did you know that all mortgage advisers and brokers in the UK need to hold a certificate in ‘mortgage advice and practice’ before being able to give professional mortgage advice to clients? There’s a lot that goes into getting these certifications. We work hard to maintain ongoing professional development to retain the qualification.
Our adviser’s work is continually monitored by compliance officers to ensure standards are being maintained. You can rest assured that your adviser is qualified and an expert in their field.
We’re also regulated by the Financial Conduct Authority (FCA). So, not only do we want to find a mortgage deal that’s right for you and that you can afford, but it’s a regulatory requirement of our services! We have a duty of care to provide you with the right financial advice, so we’ll always be in your corner. We take our services very seriously and we care about what we do. We’re professional at all times, whilst remaining friendly and approachable, ensuring each client receives the best support possible. We’re proud to have received 4.9-star rated reviews from our clients, with 98% saying they’d recommend us.
We educate you along the way
We work with first-time buyers, as well as people who are on their third or fourth home purchase. We’ve learned that no matter where someone is in their homeownership journey, many people don’t truly understand their mortgage deal and the opportunities that might be open to them.
Of course, part of the motivation in hiring a mortgage adviser is having consistent support from an experienced mortgage professional. This means you don’t have to get bogged down in the detail. But on the other hand, a mortgage is one of the biggest financial commitments you’ll ever make. We want to empower you to understand how it works.
When we find you a mortgage, we’re not just comparing the best deals. We’ll take the time to get to know you and your needs to ensure that we find the right product for you. And once we have, we’ll make sure you understand why we believe that this is the right product for you. Mortgages can be confusing, but we promise we’ll break it down and make it as straightforward as possible!
We offer long-term support
Your mortgage term is likely to be a 25+ year commitment. We plan on sticking around with you throughout! Most people tend to change their mortgage arrangements a number of times during the term of their borrowing and that’s why we work on building a relationship with you so that we can help you throughout your homeownership journey. We’re proud that 80% of the mortgages we arrange are for clients reusing our services to remortgage.
When you work with a Mortgage Light adviser, they’ll keep in contact with you from time to time to see if your circumstances have changed. They will review with you to consider if it’s time to remortgage to a more appropriate deal. We’ll be here when you’re ready to move house too. Working with a mortgage adviser who has experienced your homeownership journey with you has huge advantages as they will truly understand your needs and situation.
Whether it’s remortgaging, moving, adjusting your mortgage repayments, investing in a second property or taking out life cover, Mortgage Light are with you every step of the way.
Are you in need of a mortgage expert? Look no further than Mortgage Light. With a mixed dynamic of skill sets across our team, we cater for all aspects of the mortgage and assurance market. We’re confident that we can help you, no matter what your financial situation.
Get in touch with us today on 01908 597655 or contact us via our website.
Does Getting Rejected for a Mortgage Affect a Credit Score?
The short answer is, no, getting rejected for a mortgage will not directly affect a credit score. However, the long answer to this question isn’t quite as black and white as that. Whilst rejection of a mortgage application itself won’t harm your credit score, the lender you have approached will have conducted a ‘hard search’ on your credit file as part of their assessment process. The record of this search may then have an impact on your score. If you have numerous hard searches on your credit file in a short period, then this can affect your credit score in a negative way.
So, what can you do to try to ensure that your credit score doesn’t get negatively affected when applying for a mortgage? In this article, we offer our top tips on keeping your credit score in check.
Common reasons for a mortgage rejection
Firstly, let’s talk about some of the reasons a mortgage application might get rejected. Whilst this is by no means an exhaustive list, it does contain a few of the more common reasons:
- A large number of credit applications in the past six months, resulting in multiple hard searches recorded on your credit report
- Poor credit history
- Recent missed or late credit payments
- A County Court Judgement (CCJ) or other adverse judgement on your record
- Large amounts of existing debt
- Not registered to vote on the electoral roll. This is important as it allows lenders to check some of your personal information and link that in with your credit history
- Failed the mortgage affordability assessment based on your current income and expenditure
- Self-employed or a contract worker with insufficient proof of consistent income
- Mistakes or inconsistencies on your application form and in supporting documentation, such as the incorrect address or spelling of names. Perhaps the payslips provided don’t match up with the claimed annual income
- Insufficient deposit available
- Failing to meet the income criteria for the size or type of mortgage applied for
- You’ve lived in the UK for less than three years
- They didn’t like the house that you were buying
If you do get rejected for a mortgage (or any other credit), it’s a good idea to try to find out the reason why. Mortgage lenders are not obliged to give any explanation for their decision, however, most will provide feedback if requested.
Find out more – ‘What happens if a mortgage application gets rejected?’
Why is my credit score so important when getting a mortgage?
When you apply for any type of credit, but particularly a mortgage, lenders will start by looking at your credit score to help them decide if you are creditworthy enough for them to lend to. This is because your credit score is a reflection of how you’ve managed credit facilities previously and is, therefore, an indication of how you are likely to manage your finances now and in the future.
A high credit score is generally an indication that you can be considered creditworthy and therefore lower risk to lend to. Applicants with a lower credit score will generally be considered a higher risk. They may find it harder to secure credit facilities. A low score is a warning to potential lenders that you may have a history of poor personal financial management. It may suggest a risk of future missed or late payments.
Although not all lenders will reject an application based simply on a poor credit score, they are likely to restrict any offer they make to mortgages with a less desirable interest rate. This is to compensate them for the increased perceived risk that they are taking in lending to you.
Find out more – ‘How does bad credit affect a mortgage?’
Why does a hard search affect a credit score?
A hard search on your report is evidence that you’ve applied for a credit facility of some sort. A lot of hard searches over a short period of time might suggest that you have a high reliance upon credit to fund your lifestyle or perhaps that you’ve had applications for credit rejected several times and are struggling to secure the mortgage you need.
This is generally taken as a warning sign and will negatively affect your credit score for at least the next six months. As we know, a poor credit score is likely to reduce your ability to get approved for credit in the future.
How to avoid mortgage rejection due to a poor credit score
Of course, no one wants to see their mortgage application get rejected. Especially because of a poor credit score. Luckily, there are some things that you can do to try and keep your credit score healthy and minimise the chance of your mortgage getting rejected.
Avoid applying for credit
Applications for credit usually stay on your file for a minimum of 12 months. However, they can stick around for a maximum of two years. With that in mind, it’s a good idea to avoid applying for too much credit in the months ahead of making a mortgage application in order to minimise the number of hard searches on your report.
If you do need to apply for credit, make sure that you only apply for credit you have been pre-approved for or that you are confident that you are eligible for. Some credit lenders will allow you to do a soft search before applying for credit to see if you are likely to be accepted. A soft search will generally not affect your credit score. Additionally, try not to make more than two or three applications for credit every few months. It’s a good idea to try to space them out as this may also help to protect your credit score.
Keep on top of your financial commitments
It may seem obvious – and we know that it’s easier said than done – but try and keep on top of your financial commitments at all times, but especially before applying for a mortgage. Make sure that all repayments on any loans, credit and utility bills are made on time and in full.
Ensure that credit card payments are also made on time. If possible, pay off outstanding balances each month. If you have any credit cards that aren’t in use, then it may be a good idea to close these down. Ironically, it can help your score to maintain and use at least one credit card. However, only if you keep well within the approved limit and clear the outstanding balance in full each month.
Ensure you are on the electoral roll
Lenders use information from the electoral roll to confirm details such as your full name, address and residential history. These details must match up to what you have put on your mortgage application. If they don’t match or you cannot be found on the electoral roll, then some lenders may choose to decline your application at this point.
If you are not on the electoral roll, try to get this rectified before applying for a mortgage. Check that all your details are recorded correctly, including spellings etc.
Check your credit file regularly
Obtain a copy of your personal credit file to make sure that the information recorded is accurate and up-to-date. Mistakes can and do occur. If you spot any errors then contact the lender concerned to get this corrected as soon as possible.
It is important to do this regularly to try and spot possible identity theft. This is where fraudsters use your personal details to fraudulently obtain credit. They then default on this credit, leaving you with adverse history on your credit file. This is becoming increasingly common. It can have a devastating impact and take a huge amount of time and effort to get corrected. You can obtain a free copy of your credit file from companies such as ClearScore.
Speak to a mortgage advisor
Lastly, speak to a mortgage advisor before you actually make any mortgage applications, particularly if you have concerns. No one will be better placed to help you than a professional.
A mortgage advisor, such as us here at Mortgage Light, will be able to help pinpoint any potential issues and put you on the path to success when applying for a mortgage. We’ll match you with the most suitable lenders for your situation and contact them on your behalf when we are confident that you are in a good position.
We’re here to give you the best possible chance. Need our help? We’re available to chat on 01908 597655 or you can contact us via our website.
How do Joint Mortgages Work?
There can be many advantages to purchasing a property jointly with somebody else. For example, by pooling your resources together, you might be able to provide a larger initial cash deposit. This would reduce your loan to value (LTV) and therefore getting access to lower interest rate mortgage deals.
Combining incomes could also help you get a larger mortgage offer, allowing you to purchase a more desirable property. And of course, having more than one household income should make owning a home more affordable. It means you can share the cost of mortgage repayments and household bills, etc.
To achieve these benefits, you would need to take out a joint mortgage. You may choose to purchase a property jointly with your partner, a friend, a group of friends, a business partner, your parents or a family member. Perhaps you yourself are a parent looking to take out a joint mortgage with your adult child to help them get onto the property ladder.
There may be many motivations for taking out a joint mortgage. In this article, we’re going to explain how a joint mortgage works.
What is a joint mortgage?
A joint mortgage is simply a mortgage that allows you to borrow money jointly with another person. You can then purchase a property that you will own jointly. With joint mortgages, all applicants must be over 18. They will be joint owners with a legal claim to the ownership of the property. They will all be liable for the entire mortgage and its repayments. This means that if one person is unable or unwilling to pay their share of the mortgage repayments, then it falls to the other person (or people) to pay the full amount due.
Joint mortgages can be very attractive, however, because they allow you to combine your savings with another person. You may then be able to put down a larger mortgage deposit than you would have been able to do alone. This could give you access to better mortgage deals, given the lower LTV represented. It should also mean that all of the costs involved with purchasing and maintaining a home can be split between those on the joint mortgage, as opposed to falling to just one person.
Who can take out a joint mortgage?
Most commonly, joint mortgages are taken out by just two people. This is usually couples in a relationship. You don’t need to be a married couple to take out a mortgage and in fact, cohabiting couples are the fastest growing family type in the UK.
Unmarried couples have a few different options when it comes to taking out a joint mortgage. They can opt to be joint tenants. This means that both parties have equal ownership of the property. If one person were to die, the joint tenant and partner will automatically inherit the other’s share of the property.
Another option is to be tenants in common. Again, this is designed for unmarried couples, but who perhaps have different earnings and would like to contribute different amounts to the mortgage. It protects the difference in contributions should the relationship break down. It also means that in the event of one partner dying, the surviving partner would not automatically inherit the other partner’s share of the property.
It’s not just couples that joint mortgages appeal to. Depending on the lender, you can take out a joint mortgage with up to three other people. The maximum number of people who can be on a joint mortgage is normally four. This can make it an attractive option for groups of friends living in an area where property prices are higher, such as London, who want to combine their resources to purchase a property together. It might also appeal to business partners who want to invest together in a buy-to-let property. However, this is something of a specialist area and subject to other rules and opportunities.
Perhaps two parents want to help their adult offspring take their first step onto the property ladder. They may take out a joint mortgage in all three names. Parents should be aware that if they already own a property, they may have to pay an additional 3% Stamp Duty Land Tax charge when purchasing a second property. There may also be capital gains tax to pay on their share of the property if and when it gets sold in the future.
If this is a concern, parents may decide to act as mortgage guarantors instead of taking out a joint mortgage. This way they can still provide security for their child without having to be named on the mortgage or title deeds. They would also, therefore, avoid some of the tax implications.
Find out more – ‘What is a mortgage guarantor?’
How much can you borrow with a joint mortgage?
Generally speaking, you can borrow more when you buy with someone else. A lender will take into account your combined income when assessing your mortgage affordability. When a lender assesses affordability, they normally multiply the applicant’s income by a set amount (usually around four times). This will determine how much they are willing to lend.
Clearly, joint incomes will be greater than a single applicant’s income. This will generate a higher mortgage offer. At the same time, having two incomes supporting a mortgage application will provide greater comfort to a lender. If one person lost their income, there will still be another person to provide financial support.
Let’s say you earn £25,000 a year. The person you are taking out a joint mortgage with earns £30,000 a year. This puts your combined income at £55,000. If a lender is offering a mortgage up to four times your combined income, this would mean you could be able to borrow up to £220,000.
Determining affordability is not quite as cut and dry as that, however. A lender will also want to take a close look at your incomes. They will also look at your individual credit records, any debts outstanding, your personal incomings and outgoings and any other liabilities or financial responsibilities you may have. If you would like to find out how much you could potentially borrow on a joint mortgage, speak to us here at Mortgage Light.
Can I get a joint mortgage with bad credit?
This will depend on the level of any bad credit you have. It will also depend on the criteria of the lender you approach. Of course, when you apply for a joint mortgage, a lender will run the usual credit checks and take the combined credit histories into account. If one of you has a particularly good credit score, this can benefit the overall application. Similarly, an applicant with a poor credit score could bring down a joint application.
If you have a particularly low credit score, it may work to your advantage to apply for a mortgage jointly with someone who has a good score. Your combined score may be strong enough for you to get mortgage deals that would otherwise have been denied to you if it was your name alone on the application. Of course, your poor score will negatively impact your joint applicant. However, as long as your combined score is sufficient to be accepted, then having your joint incomes and therefore access to possibly higher borrowing may offset this.
If you are worried about getting a joint mortgage when you have bad credit or with a joint applicant who has bad credit, then we recommend you speak to a mortgage advisor and broker for guidance. At Mortgage Light, we know how best to structure applications. We know exactly which lenders to turn to when working with people who have a less than perfect credit score.
Find out more – ‘How does bad credit affect a mortgage?’
How to get out of a joint mortgage
The problem with joint mortgages is that you may come to a point where one person would like to be removed from the mortgage. Perhaps you took out a joint mortgage with a partner and you’ve decided to separate or divorce. Perhaps you took out a joint mortgage with a friend. They’ve now decided they’d like to move away or get a joint mortgage with their partner instead. These situations can be challenging, but there are a few different options available to you.
You could sell the property, all move out, pay off the mortgage and split any net sale proceeds between you. Alternatively, one person could seek to buy the other out by taking out a new mortgage in their sole name (or jointly with a new partner). They would then fully refinance the existing mortgage and pay off the leaving partner with their share of the property’s equity. It’s worth mentioning that all owners must agree to whatever course of action is taken. All joint owners have a legal right to remain in the property unless a court order rules otherwise.
Unfortunately, joint mortgage separation can be complicated. It’s never quite as easy as simply taking a name off the mortgage. Always seek professional advice before settling on a route to go down. It’s important to ensure that the process is handled correctly.
A huge proportion of homeowners take out joint mortgages. It is often the most practical route to buying a property. If you are interested in getting a joint mortgage, let us at Mortgage Light advise you and help secure the perfect mortgage deal. We have access to the whole mortgage market and are confident we can find you exactly what you need.
Simply call 01908 597655 or contact us via our website to speak to one of our friendly advisors.
What Does LTV Mean?
Loan-to-value, otherwise known as ‘LTV’ is a phrase that you’ll quite often hear used within the housing and mortgage market. It’s something that lenders look at when assessing the level of risk attached to any secured loan they may be considering offering. It will often drive the level of interest rate being charged.
It’s an important part of the mortgage process, but what does LTV actually mean? In this article, we explain everything you need to be aware of regarding loan-to-value.
What does LTV mean on a mortgage?
In the mortgage world, LTV is a calculation used by lenders use to describe the relationship between the outstanding mortgage balance and the market value of a property. It refers to the percentage of your property’s market value that is being funded by your mortgage.
For instance, let’s say you put down a 20% deposit on a property. You take out a mortgage to cover the remaining 80%. Your LTV ratio would be 80% because 80% of your home is being paid for by your mortgage.
The higher the LTV, the higher the risk profile for the lender. This is because, in the event of you defaulting your mortgage for any reason, a higher LTV means there is a smaller buffer between what is owed on the mortgage and what the market value of the property might be.
Your LTV ratio will change over time. This is often a result of you paying down your mortgage borrowing each month. This reduces the mortgage amount against the property value. It may also change as a result of the market value of your property changing. A rise in the value of your house will reduce the percentage of your property funded by your mortgage. As a result, it will reduce your LTV.
For example, a £200,000 house with a £160,000 mortgage will have a loan-to-value of 80%. If the market value of the property increases to £220,000, and the mortgage remains at the same level, the LTV will reduce to around 73%. Remember, however, that houses values can go down as well as up. A fall in your property’s market value could result in the LTV increasing.
How does LTV affect interest rates?
To compensate lenders for the higher risk associated with providing higher LTV mortgages, these mortgages generally attract a higher interest rate. Similarly, mortgages with lower LTVs are usually offered at lower interest rates. This means that it can be much cheaper to borrow the same amount of money if there is a lower LTV.
Are higher LTV mortgages really more risky to the lender? Well, think about it this way. A home bought with a 90% mortgage would only have to lose 11% of its value to go into negative equity. This is where the market value of the property isn’t sufficient to cover the balance outstanding on the mortgage. As a result, if the lender were to have to repossess the property for any reason and then sell it to try and recoup the amount outstanding on the mortgage, the sale proceeds wouldn’t be enough to get all of their money back.
Lenders also know from experience that properties that get repossessed tend to have suffered neglect for some time prior to this. Very often, they fail to reach their full market value at auction. As a result, the reduction in value seen in such properties will see them not get all their money back.
A lower loan-to-value mortgage of 60% however, means that the market value of a property can fall by over a third before the lender faces any real risk of loss. This is why lenders save their more attractive mortgage deals for customers with lower LTV borrowing.
Find out more – ‘How much interest am I paying on my mortgage?’
How to calculate LTV
LTV is expressed as a percentage. It is calculated by dividing the value of the mortgage outstanding by the value of the property. There are plenty of online LTV calculators to help you do this.
Let’s say for example that you wish to purchase a house for £200,000. You intend on putting down a 20% deposit of £40,000. To complete the purchase, you will need a mortgage of £160,000. By dividing the required mortgage (£160,000) by the property value (£200,000) and then multiplying by 100, you get the LTV which is in this case 80%.
What is a good LTV?
So, we now know that low loan-to-value mortgages are generally preferable and often come with lower interest rates. High LTV mortgages are considered higher risk and often come with higher interest rates. But what exactly is considered low and high for LTV?
As a general rule, anything below 80% LTV is considered low. Anything higher than 80% is considered high. For that reason, it’s a good idea to try and put down at least a 20% cash deposit. Of course, this can be difficult for first-time buyers. It’s not uncommon to have a higher LTV mortgage when you purchase your first property. As you build up equity in your property, you could then look to move on to lower loan-to-value deals later on.
For first time buyers, it can still be worth taking on the more expensive higher loan-t0-value borrowing just to take that first step onto the property ladder. After all, house prices might be going up faster than the value of your savings! If you start off with a high LTV mortgage, then you can always look to remortgage onto a cheaper facility later, once you have seen your LTV start to reduce as a result of either house price rises or your borrowing reducing (or most commonly, a combination of both).
Got more questions about LTV? Just give us a shout! Our friendly and experienced mortgage advisors would be happy to help you. Contact us via our website or call 01908 597655.
What Happens if a Mortgage Application Gets Rejected?
Buying a new home can be a really exciting process, but it can also be pretty nerve-wracking. One of the most important parts of the entire process is securing your mortgage. If your mortgage application gets rejected, however, this can be really disappointing and a major setback.
A rejected mortgage application need not be the end of the road, however. In this article, we are going to talk about the reasons why a mortgage application may be rejected and what you can do to move forward from it. [Read more…]
Difference Between Fixed and Tracker Mortgages
There are a number of different types of mortgages available. It’s important to try to make sure you choose the right one for you. After all, a mortgage is probably going to be one of the biggest and longest-running financial commitments you ever make. It’s well worth getting it right!
Chances are, you’ve heard of both fixed and tracker mortgages. But what exactly are they and how do they differ? In this article, we’ll discuss the difference between fixed and tracker mortgages to help you decide which, if either, is best suited to you. [Read more…]
How to Save For a House Deposit
So, you’ve decided to begin planning your first step onto the property ladder. For many, the largest obstacle you will face is saving up enough cash for a house deposit. A house deposit is usually required by most mortgage lenders as your initial contribution towards the cost of your property purchase. For a first time buyer, saving for a house deposit can be particularly difficult – especially if you are currently paying out a large part of your income in rent for your existing accommodation.
Before you begin saving for your house deposit, it’s a good idea to have an idea of roughly how much you’ll need to save and the options available to you if you are struggling to reach this goal. Here is a guide and some tips on how to save for a house deposit. [Read more…]
How to Get a Mortgage as a Business Owner
Running your own business comes with a wealth of benefits and freedoms. However, when it comes to getting a mortgage as a business owner, you may need to jump through a few more hoops than someone who is a contracted employee.
Whilst perhaps more challenging, it’s certainly not impossible to secure a mortgage as a business owner. There are plenty of lenders out there who are familiar with business owners and willing to lend. In this article, we are going to explain a few things that you should know about how to get a mortgage as a business owner. [Read more…]
How do I Apply for a Mortgage?
Where do you start when you need to apply for a mortgage? The whole process can feel overwhelming, especially for a first-time buyer – but that is why mortgage advisors exist!
We’re here to advise and guide you through the entire process. We’ll highlight some of the different options you might want to consider and take away a lot of the leg work you would otherwise have to do yourself.
Let’s talk through the steps you’ll need to take when applying for a mortgage. [Read more…]
Different Types of Mortgage
Once you begin looking for a mortgage, you’ll come to realise that there are many different types of mortgages out there on the market. It can quickly become confusing. However, there are essentially two main types of mortgages: fixed-rate and variable-rate mortgages.
In this guide, we are going to explain how each of these mortgage types work. We will also cover other common types of mortgage and some specialist mortgages that you may come across.
Am I Eligible for a Mortgage?
To determine whether you are eligible for a mortgage, a mortgage lender will want to assess a number of different factors before giving their approval to lend to you. Taking out a mortgage generally involves borrowing a significant amount of money over a fairly long period of time. Lenders will want to look at the bigger picture of your personal situation and finances. This is to satisfy themselves that you will be able to afford this commitment.
To help with this assessment, lenders will have their own set of lending criteria. They will apply this to mortgage applications as a guide to determining their appetite to lend. As a borrower, you will generally need to meet these criteria to be eligible for a mortgage from them.
What is a Mortgage Agreement in Principle?
If you are looking to purchase a property, you may come across the terms ‘mortgage agreement in principle’, ‘mortgage in principle’, or ‘agreement in principle’. These three terms all refer to a statement from a lender saying that they agree ‘in principle’ to provide you with the borrowing you require subject to your information declared being verified, and the property you find being suitable to lend against.
A mortgage in principle is designed to give borrowers a strong indication of how much they may be able to borrow and some reassurance that they meet the lender’s basic lending criteria. As soon as you’ve made up your mind to start home-hunting and have an idea of what you may need to borrow, it’s generally a good idea to apply for a mortgage in principle.
This way you can start to search the property market with the confidence that you should be able to obtain the level of mortgage borrowing that you will eventually need to support a property purchase in the property price range you are looking at.
What Fees are Involved in Buying a House?
Whether you are a first-time buyer, or selling your current property and moving on to the next, there are a number of fees and charges that you will need to factor into your overall budget when considering the cost of purchasing a house. [Read more…]
What is a Fixed-Rate Mortgage?
A fixed-rate mortgage is a mortgage product where the fixed interest rate is guaranteed to stay the same for an agreed fixed period. It pretty much does what it says on the tin! Unlike with a variable rate style mortgage, you’ll know exactly how much you’ll need to repay each month during the agreed fixed period. [Read more…]
What is a Mortgage Guarantor?
The basic requirements for getting a mortgage are generally a good credit history, a steady and reliable income, plus a cash deposit of a minimum 5% of the value of the property being purchased. Once you have those in order, lenders can assess your suitability as a mortgage borrower, taking into account your employment record, credit history, and general finances. [Read more…]