A flutter on the Grand National will not derail your mortgage application, and having existing debt isn’t a deal-breaker either; it can work in your favour. Mortgage Navigators are here to debunk the mortgage myths and advise on the reality of mortgage approval.
Reality: If you occasionally spend a little money on gambling for fun, like the odd flutter on the Grand National, it won’t stop you from getting a mortgage. But, if you’re regularly spending a lot on gambling, it might make mortgage lenders worried about your ability to handle money responsibly, and ultimately to make your payment on your mortgage.
Reality: If you’re self-employed, a sole trader, Limited Company or a professional contractor, you can still get a mortgage. Your application is assessed slightly different to a PAYE worker, but you just need the right paperwork, indicating a reliable income and ability to pay, and you have the same chance as anyone else.
Reality: Mortgage lenders review your financial statements over the previous six months, at a minimum, prior to application. Occasional splurges or spending on non-essentials will not automatically hurt your chances of getting mortgage approval. Lenders want to see an overall responsible financial history; just not overspending beyond your means. Treating yourself from time to time is okay; but a generally stable and responsible financial track record is essential.
Reality: When applying for a mortgage, what mortgage providers primarily assess is your ability to make repayments. Lenders focus on your financial stability, and ability to repay the loan, rather than your relationship status. Most banks will have exceptions available on Loan to Income assessment criteria.
Reality: You don’t need to choose a property before applying for a mortgage. You can get pre-approved for a mortgage without a specific property in mind. This approval, known as ‘House Hunter Approval in Principle,’ usually lasts for about 6-12 months. It gives you the confidence to start your house-hunting journey.
Reality: It’s worth speaking to a mortgage broker as early as possible. From an initial assessment call, you get valuable feedback about your application prospects and what, if any, steps need to be taken to ensure full approval. So, even with some blips in your finances, there is time to put things straight, and you may just be pleasantly surprised at what lenders can do!
Reality: Having debt or outstanding loans is not a deal-breaker when applying for a mortgage. Lenders primarily assess your ability to repay the mortgage. If you have been making regular and responsible repayments on your existing loans, this can actually work in your favour during the mortgage approval process.
Reality: You are not bound to your mortgage provider for life. You have the freedom to switch to a different mortgage provider if you choose to. While the process of switching mortgages may seem cumbersome, it can potentially save you a significant amount of money in the long term.
Mortgage providers constantly compete for customers, so it can be beneficial to explore better offers in the market by speaking to a mortgage broker.
Reality: While your rent may not have a direct influence on the mortgage approval process, it can demonstrate your repayment capacity. Lenders want to assess what you can realistically afford, in terms of mortgage repayments. Consistently paying rent on time, and saving money to pay it, can indicate your financial responsibility and ability to meet future mortgage payments.
Reality: While it’s not necessary to demonstrate loan repayment before applying for a mortgage, if you have fewer financial commitments, like loans, it can leave you with more disposable income to put toward your mortgage. However, if you do have a personal loan or other commitments, it’s okay, as long as your income shows that you can meet all of your financial obligations, including the new mortgage.
Reality: While banks scrutinise your financial history, especially over the the last six months, a single bank charge is highly unlikely to result in automatic rejection of your mortgage application. Lenders assess your overall financial behaviour, including good financial habits. Being consistently in overdraft, or having regular charges, may be seen as a red flag. If something is explainable though, it can be got around!
Reality: With approval in principle for a mortgage, it’s important to maintain your financial stability, and not make any significant changes to your financial circumstances. Taking out other loans or making substantial financial changes during this time will show up on your credit report, and potentially impact your mortgage application.
Saying that, banks are aware that life continues, and things happen, and sometimes there can be an unexpected cost. In this case, it’s very important to stay engaged with your broker to review what, if any, implications it may have on your application.
Article by Margaret Barrett
Managing Director at Mortgage Navigators,