Mortgage Tips for ‘Mortgage Misfits’

Last month, I explored the factors that could reduce your chances of getting a mortgage.

I identified some specific groups of ‘mortgage misfits’ that may have difficulty getting signed off by your average UK lender.

Below are four groups of mortgage misfits. Click on your relevant group to get tips on how to improve your mortgage eligibility:

1. Individuals earning £25k or below
2. Self-employed individuals
3. Those with poor credit history
4. Individuals who may be over 65 before their mortgage ends

The following tips outline how to escape the constraints of each type of ‘mortgage misfit’.

Getting a mortgage whilst in a lower income bracket can be difficult, here’s what you can do to improve your chances:

1. Build up your credit rating as soon as possible

Your credit rating is based on a strong and reliable credit history – the longer the credit history the better. I applied for my first credit card and got myself on the electoral roll 12months before I expected to apply for a mortgage but I’d suggest building your credit history much earlier if you can.

2. Build up your savings

The larger the down payment the better your chances of securing a mortgage. Not only does this reduce the amount that you will have to borrow but also shows a strong level of financial control and stability.

Taking the leap into self-employment can be a mighty scary one. Whether you own your own shop or you’re working from home, it can be disheartening  to know that despite your efforts banks are unwilling to lend simply because you own your own business.

Here are some tips to get you out of the mortgage misfit rut:

1. Ensure you are keeping up to date records and accounts
Keep your own receipts, ensure both incoming and outgoing work transactions go through your business account. It can also be a very good ides to hire a certified/chartered accountant is a wise choice to prepare your accounts and manage your tax return.

2. Do not minimise your income / drawings
As the owner of your own business you have control over how much salary and dividends you take from the business’s revenue. This structure of this differs depending on whether you’re a sole trader or a limited company. Keeping your assets from incurring additional tax can be a big reason to keep funds within the business.

However, lenders want to see that you have strong flow of consistent income into your personal account. Ensure that months and months prior to submitting your mortgage application you have a steady stream of recurring personal income.

For more tips visit: http://www.totallymoney.com/guides/self-employed-mortgages/

Even with a poor credit rating you can still acquire a mortgage. However, lenders tend to require a larger down payment to lower the risk on their side – most lenders require at least a 20% downpayment but depending on your rating some lenders can ask for up to 40%!

1. Improve your Credit Rating

The truth is, the best use of your time in the short term will be to improve your credit score. To help you do this, MSE has an impressive guide on how to improve your credit rating.

2. Maximise your income and savings

Having a big deposit and dependable salary isn’t everything but it certainly helps. Build up your assets and find ways to increase your income. Here’s some tips on how to get ahead in your current career.

3. Shop around

There are plenty of bad credit mortgage lenders out there. Be sure that you are getting a good deal in the long run and that you can comfortably keep up with any mortgage payments.

Based on a study by IBS, a third of the UK overall (33%) are concerned about the availability of mortgage products in the future when they are older. Getting a mortgage later in life can be tricky, however it is certainly possible. Follow these tips to improve your chances:

1. Consider the length of your mortgage agreement

If you can comfortably afford the repayments on a 20 year mortgage rather than a 25 year mortgage then this is ideal. Utilise a comparison site to see how the different mortgage terms affect your mortgage repayments – the comparisson site may not give you best possible deal, but it will give you an idea of which length of mortgage you can afford.

2. Choose Your Mortgage Provider Carefully

In response to the Mortgage Market Review (MMR) some banks and building societies have restricted lending to borrowers where the term takes them over the age of 65.

Take a look at the Retirement Mortgage Programme from IBS which is more favourable to older borrowers and also takes into account other forms of income, including pensions and investments.

What have you done to improve your chances of getting approved for a mortgage? Let me know in the comments below!