British homeowners are £326,000 better off than renters, according to a recent study. But to benefit from this, you first need to get approved for a mortgage. Sadly, two-thirds of first-time buyers have their mortgage applications rejected, according to The Independent. So just what can you do to ensure you secure the cash for the house of your dreams?
Wait for a big rule change
Since 2014, lenders have completed affordability checks on anyone that applies for a mortgage. Affordability checks typically compare your income versus your outgoings. They also assess whether a mortgage would still be affordable to you if you were moved to a high-interest rate that’s 3% higher than the standard rate. It’s this part of the affordability checks that is set to be scrapped, according to The Telegraph. If this goes ahead, it will be easier for all groups of people to qualify for a mortgage, including the self-employed. It’s not yet known when the Bank of England will give the green light for this change, but it looks like it will be soon. So, if you can wait a little while longer before putting your mortgage application in, it’s probably best to do so.
Find the right lender
It’s not just first-time buyers that need to ensure they can get a mortgage. Just over 50% of mortgage holders remortgage. One of the biggest benefits of remortgaging is that you can save an average of £8,000 in just two years. However, just because you’ve secured a mortgage once, doesn’t mean your remortgage application will be successful. You need to carefully think about why you want to remortgage and find a lender that specializes in refinance. Perhaps you want to refinance because you want to use the equity in your home to complete renovations. Or maybe you want to reduce your mortgage term so you pay it off quicker or you want to pay less back each month. You’ll usually need your last two wage slips and two months’ bank statements to qualify, so make sure you’re able to provide these as these will give the best chance of getting a new mortgage deal.
Opt for a long-term deal
The average mortgage length in the UK is 25 years. Occasionally, borrowers opt for a 30-year deal instead. But now 40-year deals are coming onto the market. As you’ll be paying the mortgage back over a longer period of time, you’ll pay less back each month. This makes it more affordable than a standard 25-year deal for many people. To qualify, you must not be aged more than 70 at the end of the mortgage. The one downside to this type of mortgage is that you’ll pay back a lot of cash in interest. But it is a quick and helpful way to get your foot on the property ladder.
There has been an excess of people being rejected for mortgages recently. But things are changing quickly and it looks like more individuals than ever will soon qualify for a home loan.