The recent LBTT threshold change, combined with a re-evaluation of homeowner priorities has led to a surge in demand for property in Scotland. The current levels of market activity looks set to continue for the foreseeable future.
In today’s busy market, it’s important that when buying your first or second home, you are prepared and have everything in order – including your finances. This will help to avoid any unnecessary delays when buying your new home.
Your credit score
Lenders will take a look at your credit score to get a general picture of how you manage your finances. It will tell them how much debt you are in, whether you repay the debt, if you have faced any financial difficulty and how much available credit you are using. Take a look at your credit report to make sure it’s accurate, giving yourself time to sort out any problems, and consider how you can improve your score.
In the six months before applying for a mortgage, try not to apply for too many credit cards or loans. Pay your debts on time and if you can, pay your credit card bill in full rather than just meeting the minimum payment. Missing any scheduled payments will impact your credit score and deem you ineligible for certain mortgage products or rates so make sure you don’t miss any payments such as your mobile phone bill, credit card, loans, car payment and any other dents. Your lender needs to view you as financially responsible.
Another simple way to improve your credit score is to make sure you are listed on the electoral register.
Save your deposit
At present lenders are asking for a minimum deposit of 10% when buying a home (less if you are using a government scheme such as Help to Buy (Scotland). The more you can save, the better, as this means you can secure a more competitive rate which will keep your monthly repayments down. Proof of being able to save money is also a good indiction to lenders that you are good with finance. Although gifted deposits are still acceptable.
Lenders will look at your employment status, income and employment history when you apply for a mortgage. If you have a regular income you will eligible for more products. If you are considering a job move or career change, you might want to wait until after you have secured a mortgage and bought a home. It can also be harder to prove stable income if you work for yourself so get everything in order if you are self employed including bank statements and tax returns submitted to HMRC.
Get the right advice
As with all major financial decisions, it is important to talk to the experts to find out what you need to do to prepare for your mortgage application. A mortgage broker will not only help you work out the deposit required and the cost of your mortgage but also the other costs you will need to consider. These include the property valuation, surveyor fees, legal and estate agents’ fees, removal costs, maintenance charges and regular bills once you have moved. Whilst some of these are one-off costs, others are a long-term commitment. Make sure you are aware of all the costs before you even consider taking out a mortgage so that you can plan ahead. Finally, make sure you use a mortgage broker who can look at the whole of the market to secure the right mortgage for your circumstances and will often have access to deals that aren’t available from high street lenders.
If you are considering a mortgage now or in the future, talk to us at The Mortgage Hub and we can help you to prepare.