FAQs

A mortgage is a loan made by a bank or building society to help finance the purchase of a home. In exchange, you agree to repay the loan, typically with interest, over a specified period. A mortgage is a secured loan which means that the loan is secured against the property until the mortgage is paid off. Therefore, your home may be repossessed if you do not keep up repayments on your mortgage.

The are several different types of mortgages available to homebuyers. The most common ones are fixed rate, variable rate, and interest only.

A fixed rate mortgage means the interest rate stays the same for the duration of the agreed period and therefore the mortgage payment will be the same every month.

A variable rate mortgage is designed to go up and down in line with interest rate fluctuations. The most common type of variable rate is a tracker rate which falls and rises in keeping with changes to the Bank of England’s base rate. This means that there could be times when a variable rate mortgage will save you money, and other times when it could cost you a little more.

An interest only mortgage is where the borrowers only pay the interest amount for a specified period, after which they begin paying both the principle and interest amounts. Monthly payments are lower initially but can increase significantly when the interest-only period ends.

Different lenders apply different lending criteria, which is the amount a potential buyer can expect to borrow. Lenders tend to use an affordability calculation which takes into consideration not only your various income and where it comes from but also your expenditure. To find out how much you can borrow you’ll need the following information:

• Details of your income – If you’re employed these include salary, bonuses, and overtime. If you are self-employed, we would need a wider variety of information. Please see below for more details.
• Details about your monthly outgoings. These include things such as council tax, telephone bills, insurance, utility bills, gym memberships and streaming services.
• Details on any payments you make on money you have borrowed such as, personal loans, car finance and credit card payments.

You will typically need at least 5% as a first-time buyer and the more deposit you can put down will allow you to access the most competitive interest rates on the market. The source of your deposit may come from your current property, savings, inheritance, or a gift.

Most mortgage products have at least one fee attached to them, if not two. The biggest fee you’re likely to pay is called the arrangement fee, although it can also be called the product fee, booking fee or application fee. Some lenders can offer low interest rates to make their products look more attractive but inflate the cost of the fees. You can expect to pay up to £2,500, which can be paid on the mortgage application or can often be added to the loan.

Some lenders will also charge a valuation fee which is cover the cost of valuing the property to make sure the investment is sound. This fee can vary depending on the lender, and some lenders will not charge a valuation fee at all. As a guide be prepared to part with up to £400 for the most basic valuation offered.

A mortgage can be one of the biggest investments you can make therefore it is important you make an informed decision with the expert advice and knowledge on offer from an advisor.

They can enable you get the best deal possible which may help you to save money overall by finding a mortgage with lower interest rates and fees.

Mortgage advisors have access to a wider variety of lenders so there is  to mortgage deals that aren’t necessarily available on the open market.

Every unsuccessful mortgage application may harm your chances of success next time, as each refusal will appear on your credit record. Using an advisor will maximise your chances of being accepted.

The difference when you are self-employed when compared to a PAYE employed person is how the mortgage lender will assess your income. Traditionally an employee has a basic salary that stays the same and self-employed income generally fluctuates and therefore is viewed as less stable. The way lenders mitigate this risk is by asking applicants to provide more evidence dating back further.

A mortgage if you’re self employed can be seen as more of a challenge but for Vision Financial, we find it a service we can excel in with our extensive accounting background.

There are mortgage lenders that specialise in offering mortgages to people that run their own company.  Much like with a mortgage with someone who is self employed the income is assessed slightly differently and the mortgage lenders will expect finalised and certified accounts for previous years. But also consider dividend income, any PAYE income from that company and some lenders even use company profits.

A mortgage if you’re a company director can be seen as more of a challenging application but for Vision Financial, we find it is a service we can excel in with our extensive background in accounting.

The exact documents you will need to provide can vary depending on how you receive your income and also differentiates between the lenders.

Applicants will need the following as a guide:

• Passport
• Driving licence
• Proof of address – such as a council tax or utility bill dated within three months
• Three month’s worth of bank statements from your current account showing income and expenses.
• Three month’s worth of payslips.
• Two or more years of certified accounts (if self-employed or a company director)
• SA302 forms (Tax Calculations) and a tax year overview (from HMRC) for the past two years.
• Evidence of dividend income (if a company director)
• Credit report

Lenders will want to take a look at your bank statements and examine how much you spend on bills and other costs to ascertain the affordability of your mortgage repayments. They may ask about the following:

• Household bills – such as council tax, telephone, insurance, and utilities
• Childcare
• Loan repayments
• Car finance
• Credit card repayments
• Hobbies – such as gym membership or subscriptions.
• Travel and commuting
• Socialising
• Holidays

Having a bad credit history does make it more difficult to get a mortgage, but it can still be possible in the majority of cases. To help with your chances of being accepted for a mortgage with bad credit, here are a few things you can do to improve your credit score:

• Ensure you’re registered on the electoral roll at your current address.
• Repay any existing debts
• Refrain from taking out any additional credit or debts.
• With existing credit arrangements, minimise use and stay withing 50% of credit limits.
• Pay your bills in a timely manner.

On the contrary, having no credit history can also affect your application as it makes it difficult for companies to assess you which can lower your credit score.