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Why school fees can harm your chances of getting a mortgage


School fees have become a thorny topic since the Mortgage Market Review was introduced, with lenders no longer regarding them as discretionary spending but rather viewing them as a full credit commitment like a car loan or credit card payment.

School fees can now create a huge problem for borrowers as it puts huge pressure on the affordability calculation. It can throw off some borrowers by hundreds of thousands of pounds, significantly reducing the size of mortgage that is deemed ‘affordable’.

Best advice is to speak to a broker before applying for a mortgage as various lenders view school fees differently, with one lender taking a very dim view on the affordability and others looking more closely at how long these fees have left to run. In some circumstances, if the borrower can show significant enough assets to cover the fee commitment for a period of time then the lender will take this away from the calculation altogether.  Alternatively, if there are large bonuses these can be used to cover the commitment.

Please get in touch for more information.

Jonathan Harris
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Jonathan Harris

Three things every first-time buyer should know


Buying your first home is an exciting time but it can also be daunting. Below we offer three top tips to get you started:

  1. Start monitoring and cutting back on your spending 3-6 months in advance of applying for a mortgage. Keep your bank account operating in credit or within its limit and stop high levels of discretionary spending. Also, let go of any regular committed expenditure, such as the gym membership that you don’t use. Lenders will scrutinise your bank statements to assess conduct and spending patterns to establish affordability so present yourself in the best possible way.
  2. Start thinking about the sort of property you want to buy and set yourself a realistic budget and stick to it. Consider the re-sale of the property‎. It’s your first property and your circumstances are likely to change over time, so being able to sell this property without too much difficulty will help move you on to your next move/purchase.
  3. Be prepared to take the advice of the professionals you engage with in the buying process, such as an independent mortgage broker like Anderson Harris, and don’t always go for the cheapest option. In life, you often end up getting what you pay for and if you go for a cheap solicitor, for example, you may find they are inundated with work and can’t deal with your purchase in a timely fashion.
Jonathan Harris
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Jonathan Harris

Things to remember when applying for a mortgage


This week, many people are returning from holiday and the children are going back to school. It is also time to tackle that ‘to do’ list, which may mean looking at your finances. Given that your mortgage is likely to be your biggest outgoing, it makes sense to check that you aren’t paying more than you need to. Or if you are thinking of buying a property, it pays to be aware of the information lenders are looking for.

What every borrower needs to remember now is that while mortgage rates are the lowest they have ever been, criteria is also the strictest we have ever seen.

The cost of a mortgage compares very favourably with the cost of renting, leading many would-be borrowers to expect to easily qualify for a mortgage when there is no difference between the monthly cost compared with the rent they pay. But banks are stress testing affordability at much higher rates than the actual pay rate to ensure you can still afford the mortgage when rates rise.

The same is true of remortgaging: just because a bank lent you £500,000 three years ago does not mean that the same bank or another bank will lend the same amount today. Criteria are much stricter now.

Things you need to know…

–          Your credit score is crucial. Carry out an Experian or Equifax check before applying for a mortgage to check it is correct. The main purpose of the credit check is to ensure everything is in order as this is a very important part of the application with any lender. The better the credit check, the more mortgage options will be available to you.

–   Think carefully as to how you can evidence your income. If you are self-employed, do you have three years of accounts or three years SA302 (Tax return summary pages)? Some lenders will lend based on less information but it is tougher and you will need to speak to an independent mortgage broker to find out which lenders are more flexible.

–          There has been a shift from old-fashioned salary multiples with lenders now working off an affordability model instead. A lender will assess your last three months’ bank statements with a fine toothcomb so check your contractual and discretionary outgoings.

–          What level of deposit do you have or equity in your current property? The lower the loan to valuation the better the rate you can get. If you have savings earning little or nothing in interest and are just a few hundred pounds off a lower valuation band, it may be worth putting those in to access a better rate. For example, 60 per cent LTV or 75 per cent LTV.

–          You may be able to afford the mortgage now in this low interest environment but can you afford it if rates increase? A mortgage is a long-term commitment.

–          Speak to an independent mortgage broker who should be able to search the mortgage market for the most competitive terms based on your requirements/circumstances.

–          How old are you and how do you intend to pay off the mortgage?  Some lenders will lend more to a 40 year old than a 50-year-old on the same salary as the 40-year-old has more time to pay the mortgage off by retirement age. Again, some lenders are more flexible on this than others so seek advice.

–          The bank will be taking security over the property asset. Is there anything about the property a lender may not like? Ex local authority, subsidence, is the property above a commercial premises?

–          If you are purchasing a new property do you have enough monies for all the associated costs?  I.e valuation, solicitor costs including disbursement and stamp duty etc and then money to furnish the property?

Adrian Anderson
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Adrian Anderson