What is the most I can borrow?
What term are mortgages usually for?
What is a mortgage decision in principle?
How do I prove my earnings?
What happens if I am not truthful in my application?
I have bad credit. Will I be able to get a mortgage?
I would llike to know what a redemption penalty is
What is the most I can borrow?
This will usually depend on two factors.
Firstly, your annual earnings total. Mortgage lenders have different policies but they usually apply a multiple on your annual income of between 3 and 4 times . If it is a joint application they look at the combined annual earnings and apply a multiple typically around 2.5 times.
Other lenders use more advanced credit models that take into account your expenditure as well as your earnings. You may have to fill in a detailed questionnaire that details your outgoings. Obviously if you have 5 children you are going to have less disposable income than someone earning the same with no dependents.
They are essentially checking out the affordability of the loan, something you should have already considered when making the application.
Secondly, the value of the property.
Many mortgage lenders will grant a mortgage of up to 85% of the value (as assessed by the lender's own valuers) of the property.
If the lender's valuers think that the property is overpriced for the area, they may either refuse the loan or they may offer a mortgage at a lower loan-to-value ratio.
What term are mortgages usually for?
The normal length of a mortgage term is 25 years. Although this is the traditional length, mortgages can be granted for other terms, i.e. 15 or 20 years. Obviously the attraction is the shorter the term, the less interest will need to be paid.
What is a mortgage decision in principle?
Based on the initial information you give to the mortgage lender, they may well say 'yes, in principle we will grant you a mortgage'. I.e. it is a conditional loan offer.
You can then confidently look at prospective properties and go as far as making an offer, knowing that you have a high chance of obtaining the mortgage necessary for purchase. Of course once you get to that stage the lender will want to see documetary proof of your initial statements i.e. relating to your income etc.
So it is as it states, a 'mortgage in principle'. Armed with this, estate agents and vendors will have more faith in you and you shouldn't be perceived as a timewaster. You may well be dealt with more favourably than any others competing to buy your chosen property who do not have finance in place.
How do I prove my earnings?
If you are in employment, you will be asked for written proof of your pay for the last 12 to 24 months. Typically, this will be your payslips and P60. Your employers will also be contacted for verification.
If you work for yourself or are a company director the market is a lot easier now there are specialised mortgage products for this area offered by most major mortgage lenders. They normally ask to see your accounts for the last 3 years (preferably audited).
Failing that, a letter from your accountant confirming your income will usually suffice where your business has not been running for a long period.
What happens if I am not truthful in my application?
Usually any lies will be found out by the lender. They have ways of cross-checking information. Lies about things like credit history are very easy to verify. Your application will be refused. Worse, your prospects of getting another mortgage in the future from that lender or other lenders (they share information in these cases) will be massively reduced. Best to be honest from the start.
I have bad credit. Will I be able to get a mortgage?
Obviously it is not going to be as straightforward as for someone with a sparkling credit history, but it is not at all impossible. A quarter of adults in the UK have had bad credit at some point. More than 2 million people have fallen behind with their mortgage payments. These days, most of these people would not be precluded from being offered a mortgage.
If you have a CCJ (County Court Judgment) recorded against you might mean that it is difficult to get a mortgage from the bigger High Street lenders. However there are specialist mortgage companies who are happy to provide people with adverse credit problems such as CCJs with mortgage opportunities.
I would llike to know what a redemption penalty is
Some lenders promote mortgage products that have a low introductory rate for a fixed period of time, often two or three years. After this period the rate reverts back to normal.
Obviously they don't really want you to leave them and defect to another lender before they have had a chance to earn much out of your business.
So they insert a redemption penalty clause in your contract saying that if you do exit the arrangement during this introductory period, you will be liable to pay a charge. Always make sure you ask the lender about redemption penalties and double-check your contract before you sign, as sometimes they hide it deep in the small print.
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I/we confirm that I/we have the consent of any third party whose details I/we may disclose to CCC Financial Limited ("you") to disclose such details and to authorise you and the third parties referred to in the paragraph below, to process such details for assessing my/our application and administering and enforcing any subsequent loan which may be granted to me/us.
I/we agree that you and any lender resulting from this application (the "lender") shall be entitled to use and process by any medium the information given by me/us in this application form and any other information about me/us which may be acquired during the lifetime of my loan ("the data") for the following processes:
1. To provide the data to and search the files of one or more credit reference or fraud prevention agencies whether before or during the lifetime of any loan granted to me/us by the lender, who will keep a record of such search to confirm the data and for the purposes of credit assessment or account administration. I/we understand that you and/or the lender will record false or inaccurate information if this is given by me/us and fraud us suspected.
2. To disclose that data to credit reference agencies when requested by them for consideration of any future applications for finance mad e by me or members of my household/family or for fraud prevention and/or tracing debtors (the debtors may also disclose the data to other lender for these purposes).
3. To disclose the data to any other company within the lender's group of companies and/or to any third parties (for example, debt counsellors and insurers) at any time for the purpose of assessing my/our application and administering and enforcing any subsequent loan whether during the lifetime of any loan granted pursuant to such application.
4. Unless you have previously stated otherwise, we may share your information with our associated companies within the Group and other carefully selected third party organisations outside the Group.
In considering your application Companies will search your record at a credit reference agency/ies. They will add to your record details of the search and your application. This may be seen by other organisations carrying out later searches. Organisations will use a credit score or other automated decision making system when assessing your application. It is important that you give us accurate information.
CCC Financial Ltd and its 3rd party organisations may use and search these records to:
* help make decisions about credit and credit related services, for you and members of your household;
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* trace debtors, recover debt, prevent fraud, and to manage your accounts or insurance policies;
* check your identity to prevent money laundering, unless you furnish us with other satisfactory proof of identity. The credit reference agency/ies and the fraud prevention agency/ies will also use the records for statistical analysis about credit, insurance and fraud.
Please telephone CCC Financial Ltd if you wish to have details of those
credit reference and fraud prevention agencies from whom Organisations obtain information and with whom we record information about you. You have a legal right to these details.
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I confirm I have read the Data Protection statement to the applicant(s) and confirm that authority is given to CCC Financial Ltd. and its 3rd party organisations to carry out a credit check(s) in furtherance of this application.