Our Guide to Mortgage Jargon

Our Guide to Mortgage Jargon

Taking out a mortgage is a huge financial commitment, and so you’ll want to feel you’re clear on what you have to do and when – and exactly what you’re getting.

When you start looking at and applying for mortgages, there seems to be a whole world of jargon to get your head around, some of the words and phrases you won’t have heard in any other situation – from arrears to valuations – here we take a look at the vocabulary you’ll need to understand.

If you would prefer to talk with an Expert Mortgage Advisor and have a straight-forward conversation about your Mortgage needs with simple explanations – Please give us a call on: 0800 197 0504.

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Mortgage terms explained

Arrangement fee

This is a set-up fee for your mortgage. Most mortgage lenders will let you add this fee to the loan, but this means you’ll be paying interest on it for the whole mortgage term.

Arrears

An account is said to be in arrears if monthly payments aren’t kept up to date with. When this happens, the mortgage company is likely to apply extra charges on top of their monthly payments – and the fact that your account has gone into arrears could be noted on your credit file.

Base rate

The base rate is the rate the Bank of England charges other banks and lenders when they borrow money. This influences the interest rates that many lenders charge for mortgages, loans and other credit they offer customers

Booking fee

A booking fee is charged up front and pays for ‘booking’ in the loan while your application goes through. It’s sometimes also known as an ‘application’ or ‘reservation’ fee. This fee can’t be refunded if you end up not taking the mortgage out.

Broker

A mortgage broker is a financial adviser who specialises in offering advice on mortgages. They can help by saving you time and stress when applying for a mortgage, because as they’re doing this day in day out, they know which mortgage lender might give you the best deal, based on your individual situation. They can also help you a great deal with the application process itself.

Buildings insurance

This is a (usually compulsory) policy that covers damage to the structure of your home such as the walls, roof and floors, and it usually covers damage to fixtures and fittings too. So if you’ve got a fitted kitchen for instance, your insurance is likely to pay for any repairs needed.

Buy-to-let mortgages

These mortgages are especially for landlords who want to buy a property to rent it out. The rules around buy-to-let mortgages are similar to those around regular mortgages, but there are some key differences which a good broker would be able to help you to understand.

Completion

The final stage of the conveyancing process after exchange of contracts – when keys change hands and the mortgage is officially started.

Early repayment charge

Although you may be able to move house and/or remortgage at any time with some lenders, an early repayment charge will be incurred if you repay the capital within the early repayment period – the repayment period will be stated on your contract.

Exchange of contracts

The point at which signed contracts are exchanged by the legal representatives (usually the solicitors) of the buyers and sellers in the process. At this point, the contracts are legally binding, the deposit is paid and in general everyone can rest assured the move is going to happen.

Fixed rate mortgage

With a fixed rate mortgage, your mortgage repayments stay the same for the time period (the term) of the mortgage deal. This has the advantage that you know exactly what you’ll be paying each month, however the disadvantage that if the Bank of England Base Rate changes, you won’t reap any potential rewards either.

Guarantor mortgages

Getting a guarantor to help support your mortgage application could help you buy a property when you have a small deposit, or low income. You’ll need a relative or friend who is willing to be named on the mortgage with you and make any payments you miss.

Interest

Like with most loans, as well as paying back the capital you borrow, you will also have to pay interest on your mortgage – i.e. extra money on top of the capital divided into monthly repayments. This may be calculated on a daily or annual basis, depending on the specific terms and conditions of the mortgage – all of which should be explained in your mortgage agreement.

Interest only mortgages

As the name suggests, with an interest only mortgage, you’ll only pay back the value of the interest each month, rather than paying off the actual property value itself. So, with this mortgage your monthly payments should be lower than with a regular mortgage, but at the end of the term you’ll still owe the original loan amount.

Joint mortgage

A mortgage that’s taken out with two or more people named on the contract. All people named have responsibility for meeting the repayments.

Loan-to-value (LTV)

The loan-to-value ratio is how much you’ve borrowed with a mortgage compared to the value of your property – so this depends on how much of a deposit you can afford to put down. It’s calculated as a percentage, and typically, the lower your LTV, the better chance you have of getting a lower interest rate.

Life insurance

This kind of insurance usually pays a tax-free lump sum of money in the event of your death within the policy term, which can be used to pay off your mortgage. This is a tax-free sum, that’s usually decided on at the time of applying for the policy.

Mortgage term

This is the length of time you have to repay your mortgage. The typical mortgage term is 25 years when you take it on, but they can be much shorter or longer depending on factors such as your age, and how many years you’ve had a mortgage for before.

Negative equity

When a property is in negative equity it is worth less than the mortgage secured on it, this is usually caused by falling property prices.

Remortgage

This is when the homeowner pays off one mortgage with a new mortgage using the same property as security. People choose to remortgage for various reasons, but usually it’s to bring down the overall monthly mortgage payment amounts.

Stamp duty

Stamp duty – a tax that’s paid when buying a property – it’s paid by the buyers. It is paid at the point of completion, and the amount is related to the price being paid for the property.

Tracker mortgages

Tracker mortgages are a type of variable rate mortgage. What makes them different from other variable rate mortgages is that they follow movements of another rate. Usually, the rate they track (follow) is the Bank of England Base Rate.

Variable rate mortgage

Here your mortgage rate will move up and down over the time you have it, meaning that your mortgage repayments won’t always stay the same. The main cause for this is the UK economy. If you’re using a mortgage broker, they might be able to offer their opinion on whether it’s a good time for a variable rate mortgage

Valuation

Before agreeing to provide a mortgage, the lender will arrange for a valuer to look over the property to check how much it’s worth and assess its suitability for the mortgage amount that’s being taken out.

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What is the difference between fixed and variable mortgage rates?

What is the difference between fixed and variable mortgage rates?

Deciding on a mortgage may well be one of the hardest decisions you ever have to make, so it’s important to assess and understand all the options available to you.

Fixed-rate mortgages

A fixed-rate mortgage is where your interest rate – and thus your monthly payment – remains the same throughout the agreed period, typically between 2 and 5 years. By contrast, the repayments on a variable mortgage are ever-prone to change, depending on interest rates.

Perhaps the main advantage of a fixed mortgage rate is that your monthly repayment remains the same throughout the agreed term. This can offer you peace of mind, with the predictability of the arrears allowing you to budget each month around your mortgage repayments.

Because of their security, fixed-rate mortgages are often the more expensive and sought after of the two options. Their popularity means there are many providers constantly in competition with each other though, so it it’s always worth speaking to a mortgage advisor to find the best deal.

Variable-rate mortgages

The option of a variable mortgage rate is undoubtedly the riskier of the two. If interest rates rise drastically – which they may well do – It could turn out to be significantly more expensive. On the other hand, there is always the chance that you’ll end up with a lower monthly repayment, making the variable rate cheaper. The catch is the uncertainty.

If you’re unhappy with your variable mortgage rate, or you’re coming to the end of your fixed term, you may be thinking about changing your mortgage lender. The Money Advice Service also recommends reviewing your mortgage regularly. With the competitive mortgage market constantly churning out great new deals, shopping around for a new mortgage lender can potentially save you thousands of pounds.

The mortgage market is as complex as it competitive. As such, it’s always a good idea to speak to a mortgage adviser, who will explain all the options available to you.

At Clever Mortgages we focus on providing lending advice and solutions specifically tailored to your needs – whilst providing a service you can rely on throughout the process.

If you’re looking to switch your mortgage provider, get in touch using our simple enquiry form or give us a call on 0800 197 0504.

Top 10 Mortgage Questions Answered

Top 10 Mortgage Questions Answered

Moving house is stressful enough, and getting a mortgage in place can feel really daunting. With so many different products and rates available, it’s hard to know where to start.

Taking a mortgage out is a big step and has long-lasting financial implications. The last thing you want to do is enter into one without being fully informed and knowing all the facts. To help clear things up, we’ve picked 10 of the most frequently asked questions we receive about mortgages, and we’ve answered each one of them for you.

  1. What is a fixed-rate mortgage?
  2. What is a variable-rate mortgage?
  3. What type of debt is a mortgage?
  4. How much deposit will I need for my mortgage?
  5. What should I do if I can’t afford my mortgage payments?
  6. When will the interest rates on my mortgage go up?
  7. Can I get a mortgage with a poor credit rating?
  8. How long will it take me to get a mortgage?
  9. If my income goes up, can I pay my mortgage off more quickly?
  10. What happens when I’ve finished paying my mortgage off?

1. What is a fixed-rate mortgage?

Fixed-rate mortgages are one of the most popular mortgage types on the market. With a fixed-rate mortgage the payment stays the same for the term of the rate, which will usually be between 2-5 years. At the end of the fixed term the rate usually reverts to a standard variable rate for the remainder of the mortgage – unless you switch product.

The main appeal of fixed-rate mortgages is that you’ll have the peace of mind you won’t pay anymore than what you agreed throughout your whole fixed term period – so you’ll know exactly what you’ll be paying each month. The downside is that fixed-rate mortgages tend to involve slightly higher monthly payments than variable ones, plus you won’t benefit if interest rates fall.

2. What is a variable-rate mortgage?

If you decide to opt for a variable-rate mortgage, you need to be aware that the interest rate on it can change at any time, affecting your repayment amount. If the interest rate lowers you’ll be paying less on your mortgage, but if it increases you’ll end up paying more. It’s a good idea to have funds available to accommodate a potential rise in interest rates, if you decide variable-rate is the way you want to go.

3. What type of debt is a mortgage?

A mortgage is classed as a secured debt, because the money you’ve borrowed is secured against the home you’re buying. If you fail to keep up with your repayments, your home could be repossessed.

4. How much deposit will I need for my mortgage?

This can vary depending on factors like your credit score, the lender you opt to borrow from and how much you’re looking to borrow. Generally speaking, however, you’ll need to put down at least 5% of the property’s value to secure the mortgage.

5. What should I do if I can’t afford my mortgage payments?

If you can’t afford to make your mortgage payments you need to contact your mortgage provider immediately. Burying your head in the sand and missing payments is the worst thing you can do – repeatedly missing payments can not only have a negative impact on your credit rating, but also potentially result in your home being repossessed.

6. When will the interest rates on my mortgage go up?

This is dependent on the type of mortgage. With a fixed-rate mortgage, your payments won’t change until the end of the term, at which point they could go up or down, dependant on the rate at that time.

With a variable-rate mortgage, the payments could go up or down at any time.

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7. Can I get a mortgage with a poor credit rating?

If you’ve been in debt before or entered into a debt solution, you might’ve heard you won’t be able to get a mortgage until you’ve improved your credit rating, but this might not be the case. Bad credit mortgages (also known as sub-prime mortgages or adverse credit mortgages) are available for people who’ve had some financial problems and have blemishes on their credit report.

We specialise in mortgage advice for people with less than ideal credit ratings so you could get the mortgage you need now, rather than having to wait for years. What’s more, after you’ve repaid your bad credit mortgage for a few years, your credit score should have improved, meaning you could remortgage to a standard lender with different interest rates if you wish.

8. How long will it take me to get a mortgage?

This varies depending on your situation, but generally speaking it’ll take between one and two months for a typical mortgage to be processed. This is after you’ve spent time browsing the mortgage market and weighing up the options to decide what mortgage you want to go for. Remember, entering into a mortgage is a huge decision, and you shouldn’t rush into it – make sure you’ve given yourself ample time to compare mortgages from a range of suppliers before you pick one.

9. If my income goes up, can I pay my mortgage off more quickly?

You can – but you should be sure that you can afford to do so before you consider it. As long as you’ve got enough excess cash in reserve for things like emergencies or unseen costs, paying your mortgage off early can be very beneficial. Not only does it mean you’ll have paid your mortgage off early, it also means that you could also pay less in interest due to making a lump sum payment. Just bear in mind there could be an early repayment charge though, so make sure you check with your lender first.

10. What happens when I’ve finished paying my mortgage off?

You’ll have paid off all the debt secured against your home, and your mortgage lender will remove any charges against your property they have on their system.

Want to get started?

Contact us now about finding a mortgage for you. Speak to one of our brokers, or fill in our simple enquiry form and we’ll go through all your mortgage options.

Can I get a Mortgage after an IVA?

Can I get a mortgage after an IVA?

You can get a mortgage after an IVA (Individual Voluntary Arrangement) but your choices may be more limited depending on the amount of time you have been out of the voluntary arrangement. Clever Mortgages are specialist mortgage brokers with a wealth of experience in helping to source an adverse credit mortgage after an IVA has completed.

8 mortgage lenders after an IVA

If you would prefer to speak to an Expert IVA Mortgage Adviser now, then please call us on 0800 197 0620 for mortgage advice.

How to get a mortgage after an IVA?

6 years after an IVA is registered the mark on your credit file should have come off and you should have received your completion certificate from your insolvency practitioner. This is worth checking on your credit file and also on the Insolvency Register.

Even with your credit file no longer showing an IVA it will have affected your credit rating and it can be difficult to get mainstream lenders to view your remortgage or mortgage application favorable. Luckily, there are often lenders who may provide a mortgage after an IVA. These specialist lenders are often referred to as “adverse mortgage lenders”.

Adverse mortgage lenders are found and assisted by master brokers like Clever Mortgages, who help gather information and give the required advice so you can make an informed decision.

The process of finding and applying for a mortgage after an IVA is the same as most other applications, requiring documentation and an affordability assessment. All of which Clever Mortgages can assist you with.

How long after an IVA can I get a mortgage?

You are likely to have mortgage options straight after finishing your IVA. Your credit rating may cause your options to be somewhat limited and have a few restrictions, but it is worth investigating.

The number of specialist mortgage lenders willing to consider mortgages after an IVA will likely increase the longer you have been out of an arrangement.

There are also other lending products that could be possibilities such as Secured Loans or Product switches.

In some cases, there may be lenders who would consider a remortgage with you during the IVA, but with certain requirements, such as using funds to settle the IVA.

Some lenders may decline any application for a mortgage if you have ever had an IVA, but specialist lenders could consider applications regardless of your IVA history. Generally the longer the IVA has been completed, the more lenders may become options. High street lenders may have a harder time placing your situation within their criteria, which is where a specialist master broker like Clever Mortgages comes in.

Regardless of how long ago your IVA has completed, or even if you are looking for options and you are still in your IVA we can provide advice on getting a mortgage after an IVA.

What rates can I get on a mortgage after an IVA?

Clever Mortgages have a team of mortgage advisors who have helped many other people coming out of an IVA to make successful mortgage applications and remortgages.

The range of mortgage interest rates as of 26th March 2019 are between 1.52% to 3.63%**

Clever Mortgages were able to find a mortgage for one of our customers recently which saw him save money on mortgage fees, get a competitive 1.90% rate and get this rate fixed for 5 years *APRC representative of 3.6%

Can I remortgage during an IVA?

Remortgaging whilst you are in an active IVA is possible, but there are only a few specialist lenders who would consider your case. The reason for your remortgage would also determine whether or not you were able to pursue this option.

When remortgaging within an IVA there could be requirements from the lender, such as having to use released funds to settle the IVA early.

You could remortgage during the IVA to find a better rate or to fix the interest amounts but if your intention is to release equity, you would likely be expected to pay some of this into the voluntary arrangement.

These cases are certainly worth talking with Clever Mortgages about, as they are experts in remortgaging within IVA arrangements and after their completion.

What rates can I get on a remortgage after an IVA?

Remortgaging after an IVA could be one of the first actions you take following the completion of your debt solution arrangement. The remortgage could be used to lower your payments, interest rate or to release funds for home improvements.

Overall the rates you can get will be determined by whichever lenders are available to you.

Clever Mortgages were able to consolidate the clients’ secured loan and his current mortgage into a new mortgage package. This took the clients monthly payments from £1,162 per month down to £650 saving £512 per month. *APRC representative of 3.6%

What size of deposit will I need?

The deposit size will vary by the lenders available to you, but you may be less impacted by your completed IVA history or debt solution than you think.

Some lenders may expect larger than average deposits due to your credit rating, whereas some may only expect the standard deposit size from 5% to 10% of the property value.

How to save for your deposit

Saving for the deposit can be an ordeal but you could reassign your monthly IVA payment amount into a separate account, creating a mortgage deposit savings pot.

Just because you have completed an IVA does not necessarily stop you from taking advantage of other deals such as; First Time Buyer initiatives like a 5% deposit scheme or Right to Buy schemes.

Another option is the Help-To-Buy scheme which could be an option depending on your circumstances and eligibility.

What is my credit file like after an IVA?

Your credit report will show your IVA for 6 years from the date of issue (From the start of the IVA). An IVA is an individual voluntary arrangement, meaning the term is adjusted based on your specific circumstances but usually last between 5 to 6 years, after which time you will receive a completion certificate from your insolvency practitioner.

This means that at the end or a year thereafter, the IVA will no longer be recorded as an active debt solution arrangement on your credit report. This does not mean that your credit reference will not show any debts or adverse credit like defaults or missing payments that were not included in your IVA.

Clever Mortgages are a specialist broker and can help you find a mortgage after an IVA and provide you with more information on the after effects of an IVA on a mortgage or remortgage application, including your chances of being accepted.

You can check your credit report from sites such as Experian, Noddle or Check My File which are able to give you an idea of what mortgage lenders base some of their decisions upon.

How will Clever Mortgages Help?

Clever Mortgages would use the Noddle report of your circumstances as it includes information on both Experian and Equifax. Credit reports directly from either Experian or Equifax could miss information shown on its counterpart.

Once you have a copy of your current credit profile, please complete the enquiry form below and the Clever Mortgages team can provide you with specialist advice and help find the options available to you.

A lender may consult one or more of the credit referencing agencies to help them make a decision on whether to lend to you. This can result in them potentially seeing more information on your credit profile than you would have access to (using just one credit referencing source).

A credit reference is done by a lender or mortgage broker as a part of any mortgage or remortgage application. This search is standard and highlights any current or past outstanding debts such as unsecured debt, hire purchase and secured debts.

* APRC Representative Example Mortgage amount £170,995 (including £995 mortgage lender fee), 64 payments of £748.30 at a fixed interest rate of 2.28%, followed by 236 mortgage repayments of £889.60 at a variable rate of 4.24%. Over a term of 25 years, giving a total amount payable of £258,861 at an APRC representative of 3.6%. The contract will be secured against your property.

**Based on rates available from 3 major lenders, lending on 85% LTV for a residential purchase, gift as deposit, 25-year term, and if IVA is no longer on credit file.

Check your credit score

Many people avoid checking their credit report because they have been lead to believe it will have an impact on their overall score. In fact, you can check your own credit report as often as you like without it having an impact on your score. Although every check of your report will create a footprint on your file, only searches made by financial lenders will leave a mark on your file that other lenders will see.

Check your credit score

You can check your credit file for free here with Noddle.

Checking your credit file will NOT affect your score

Many people avoid checking their credit report because they have been lead to believe it will have an impact on their overall score. In fact, you can check your own credit report as often as you like without it having an impact on your score. Although every check of your report will create a footprint on your file, only searches made by financial lenders will leave a mark on your file that other lenders will see.

Why do we check your credit score?

As responsible mortgage brokers, it’s our job at Clever Mortgages to recommend the right products to you. Having access to your credit file means we can carefully consider your lending options and discuss other options with you if they are more appropriate.

We want to make sure that we place you with the right mortgage product and with the right lender for your situation. We also have options available for people with a poor credit history.

What does your credit score mean?

Your credit score shows lenders how trustworthy you have previously been at repaying your debts. This helps lenders make an informed decision about whether or not they should lend to you now. Be aware though of the differences between no credit and bad credit.

Checking your credit score can be daunting, especially if you’ve never checked it before. The advisers at Clever Mortgages will be more than happy to help you better understand your credit score and what type of loans you might be eligible for.

Refused a mortgage with a good credit score?

Every lender has their own lending criteria which will usually take into consideration more than just your credit score. Other factors such as borrowing against the property value, length of time in your current job or at your current address.

If you know your credit score is low, then there are things you can do to improve your credit score before applying for a mortgage.

Things to avoid doing when applying for a mortgage

When applying for a mortgage you will want to avoid doing anything that could hold back your chances of being accepted. You might have already been working hard to improve your credit score and shouldn’t want to do anything that could further implicate your application.

Things to avoid doing when applying for a mortgage

When applying for a mortgage you will want to avoid doing anything that could hold back your chances of being accepted. You might have already been working hard to improve your credit score and shouldn’t want to do anything that could further implicate your application.

Lenders will want to see that you can afford to make monthly mortgage payments. They will typically use your credit report, your most recent payslips and your P60 to determine this.

We have put a list together of the things that mortgage lenders can view negatively during your application process. You should avoid doing any of these at all costs.

1.     Applying to multiple mortgage providers

Many people presume that by applying to lots of different places for a mortgage, they will eventually find a lender who will accept them. In fact, by doing this you can actually make it more difficult for you to get a mortgage. When you apply for any type of finance, the lender will typically carry out a search on your credit file. This will leave a footprint that other lenders will be able to see.  Too many applications within the same time period can be viewed negatively by lenders as it can look as though you have a desperate need for finance. By using a mortgage broker you can be confident that we will find you the most affordable and appropriate mortgage for your circumstances.

2.     Taking out another loan

You also shouldn’t consider taking out any other forms of credit whilst applying for a mortgage. This includes anything from a car loan to a phone contract. New loans can be a red flag for mortgage providers when you’re in the middle of your application. The reason for this is that lenders base your application on your DTI (Debt to Income ratio) at that time. Any changes such as a new loan will increase your DTI and can create a delay or even cause lenders to reject you. A huge concern for lenders will be whether you can still afford the mortgage payments on top of the new loan you have taken out. They will need to re-evaluate your situation in order to make a decision.

3.     Overusing your credit cards

Credit cards are also taken into consideration in your debt to income ratio (DTI). Making large payments on your credit card can affect your ratio so you should avoid doing this before and during your mortgage application. Additional debt on your credit card is a common reason for mortgage rejection, so you should refrain from doing anything out of the ordinary.  Any large purchases should ideally be held off until after your mortgage approval.

4.     Making a major purchase

Even if you’re not using a credit card to make payments, you should still avoid making any other large purchases when applying for a mortgage. Lenders will want to see that you have plenty of cash available throughout the process to take care of the various mortgage fees. If they see you’ve made a large purchase they might question your ability or intentions to repay your mortgage.

5.     Late payments on any current loans

Managing your current loans should be a key priority when applying for a mortgage. Falling behind on any money you owe can be extremely damaging to your mortgage application. If you do, mortgage lenders will likely assume that they can’t trust you to make any future payments on time. This can lead to your application being rejected altogether. It can be especially damaging if you have a history of bad credit and need to prove that you are able to make payments on time and in full.

6.     Switching your job

If possible, you should avoid changing your job during your mortgage application process. Lenders prefer you to be past the probation stage of your job role. Many lenders also won’t accept your application if you’ve been in your current employment for less than twelve months. This is because your job can be considered less secure and lenders don’t want to run the risk of you losing your job and not being able to afford to make the payments.

Myths around mortgages and credit scores

Your credit score is one of the most important pieces of information about you when it comes to borrowing money. Mortgage lenders use your credit record to help them make a decision on whether they should lend to you. However, despite their importance, there’s still a lot of misunderstanding and confusion around credit scores and what they mean.

Myths around mortgages and credit scores

Your credit score is one of the most important pieces of information about you when it comes to borrowing money. Mortgage lenders use your credit record to help them make a decision on whether they should lend to you.

However, despite their importance, there’s still a lot of misunderstanding and confusion around credit scores and what they mean.

The myths uncovered

Here we list some of the myths surrounding credit scores and what they can mean for your mortgage application.

“My credit score is too low to get a mortgage”

There’s no set minimum score required to get a mortgage. This is determined by the lender themselves. As lenders have different levels of tolerance, some will be more willing to consider you than others if you have bad credit. Although many won’t want to risk lending to someone with bad credit, there are lenders who can help.

If your credit score is low then applying with a company who specialise in offering bad credit mortgages will give you the best chance of getting approved. These mortgages work in exactly the same way as a standard mortgage, but interest rates will be higher and it’s likely that you will need to put down a bigger deposit.

“Negative information on my credit report will stop me getting a mortgage”

There are still mortgage options available to people who have negative information on their credit file. This might be a CCJ, defaults from previous loans or even a bankruptcy discharge. You may have otherwise been in an IVA or other debt plan to help repay your debts. If you’ve struggled financially in the past but are back on track now then there are lenders who will consider your application. This negative information remains on your credit file for a maximum of 6 years, so if you’re unsure that it still exists you should check your credit report. You can do this through a credit reference agency such as Experian or Equifax.

“I’ve never borrowed which means I’m a safer customer to lend to”

Lenders actually prefer to lend to people who have some history of making loan repayments. It provides proof that you have previously made payments on time and in full. As you’re likely to continue with this behaviour, it can make you be perceived as more trustworthy than someone who hasn’t borrowed before. This is because those who haven’t borrowed can’t provide any evidence to show they will make payments on time.

Having no credit can often make it just as difficult to get a mortgage as having bad credit. You should work to try and improve your credit score if you’re in this situation. This can often be the case if you’re a first-time buyer and have never had a mortgage or loan before. If you’re getting your first mortgage, here are some ways you can improve your chances.

“My partner has bad credit so neither of us will be able to get a mortgage”

If your partner has struggled with debt then it’s natural to worry about how this might affect you as well. The good news is that there are lenders out there who are willing to consider your application whether you’re buying a house individually or looking for a joint mortgage. If you have no financial links with your partner already, such as a loan or a joint bank account, then your partner’s credit score won’t affect you getting a mortgage independently of them. Even if you’re married you won’t be associated financially unless you have some sort of joint finances. Alternatively, you might be asking will my bad credit score affect my partner?

If you’re looking for a joint mortgage, however, you will become financial associates and will both be liable to repay. A joint mortgage will allow you to borrow more money, as it will take into consideration both your incomes.  Despite whether or not you have a good credit score, your partner’s bad credit will affect your interest rate on the mortgage and will likely require you to put down a larger deposit. As each person’s situation is unique, it’s best to speak with a mortgage advisor before applying.

Take a look at our article on joint mortgages for further information.

“Being on the electoral roll isn’t important”

If you have bad credit you should be doing everything you can to help improve your score. One of the ways you can do this is by making sure you’re on the electoral register. If you’re not then you should register as soon as possible. Although it’s not compulsory to vote, having your details available on the electoral roll allows lenders to easily verify your identity and address. This can have a positive impact on your credit score. If you’re not sure if you’re already registered, you can check on the website Your Vote Matters.

“Applying to different companies will increase my chances at being accepted”

Many people assume that if they keep applying for finance they will eventually find a company who will accept them. This couldn’t be more incorrect. When searching for finance, multiple applications can be one of the worst mistakes you can make. Each time you make a credit application it leaves a mark on your credit file. This is because the lender will typically carry out a “hard” search, which will leave a footprint on your credit file that other lenders can see. These have a direct impact on your scoring as they show your level of need for credit. If you have too many applications made within the same time period, lenders can be put off by your application as it can seem as though you’re desperate for credit and therefore potentially less likely to make payments on time.

The best way to approach finance applications is to do your research before applying and if you know you’re going to apply to more than one, then try and spread these out over a few months. If you want to make comparisons, you can always ask the lender to run a soft search for a quote, which will only be visible to you.

“I’ve not checked my credit score but I presume it’s ok”

Your credit score is not something that will be made itself known to you. So if you don’t check your credit score, you won’t know if it’s good or not. Many people have never checked their credit reports. Some people do this because they’re afraid of the result; others don’t check it because they don’t understand the importance of it. Some people also avoid checking their credit report because they think that this will have an impact on their score. In actual fact you should make sure you check your score regularly so you can know the situation you are in, how you can improve it and what help you to identify what types of finance you will be eligible for. This can help you avoid being rejected.

You can check your credit score through a credit reference agency such as Experian or Equifax.

“My bad credit will always hold me back”

Just because your credit is bad now doesn’t mean it will stay this way forever. There are a number of things you can do to improve your credit score and get your finances back on track. This might mean paying higher interest rates, for now, to make up for it, but over time you can prove to lenders that you’re a trustworthy person to lend to again.

Mortgage jargon buster

We know that getting a mortgage can be confusing. There are lots of things to consider and a lot of terminologies that you may not have heard before. Here we have tried to clear up the confusion by explaining in simple terms what these different terms mean.

Mortgage jargon buster

We know that getting a mortgage can be confusing. There are lots of things to consider and a lot of terminologies that you may not have heard before. Here we have tried to clear up the confusion by explaining in simple terms what these different terms mean.

Mortgage-related terms

Mortgage broker

A mortgage broker is an adviser who can arrange a mortgage between borrowers and lenders. Clever Mortgages are a mortgage broker who can help source the right mortgage for you.

Mortgage lender

The financial institution who lends the mortgage funds to a borrower in order to buy their home. We have a comprehensive range of lenders to help get you a mortgage whatever your situation.

LTV (Loan to Value)

A ratio made up of the size of your mortgage in relation to how much your property’s worth. People who are borrowing 60% or less are likely to get the best deals.

APR (Annual Percentage Rate)

The overall cost of your mortgage per year, including interest and associated fees. This amount will vary from lender to lender.

AIP (Agreement in Principle)

This is a document that you will receive from a mortgage lender to confirm that you can borrow a certain amount from them. This does not mean your mortgage has been officially approved but you can use this to show sellers that you can afford the property.

Mortgage valuations

A mortgage valuation report can give you a rough indication of how much a property is worth. They take place before your mortgage is approved to give the lender enough information on whether the property is safe to lend on. This is not the same as a homeowner or structural survey.

Surveys

A survey is a more in-depth version of a valuation, carried out by a qualified surveyor before purchasing a property. They will inspect the property to make you aware of any structural problems, major repairs or potential issues. These can help you to avoid any expensive surprises after you’ve bought the property.

Equity

The total amount of the property you own outright without considering the remaining mortgage. This includes the deposit amount, the amount of the mortgage you have paid off and any value gained on the property during ownership.

Negative equity

A property is in negative equity when the mortgage is worth more than the house is worth. This is usually caused by falling property prices.

Stamp duty

Stamp duty land tax (SDLT) is a lump-sum tax that must be paid by anyone purchasing a property in the UK above £125,000. For more information on stamp duty, please see the Gov.uk website.

Base rate

This is the interest rate set by the Bank of England for lending to other banks. This rate is used as a benchmark for interest rates in general.

SVR (Standard Variable Rate)

This is the go to rate that lenders will put you on once you’re at the end of an introductory fixed, tracker or discounted deal. Each lender will have their own SVR rate and this usually fluctuates in line with the Bank of England’s base rate but may be higher.

Mortgage arrears

This is a legal term for overdue or missed payments on your mortgage. This can lead to your home being repossessed if you don’t agree to a term with your lender to pay off the arrears as soon as possible.

Conveyancing

The legal work that takes place when you buy or sell a property. Your conveyancer will take care of transferring the cash to buy your house as well as dealing with the Land Registry.

ERC (Early Repayment Charge)

If you pay off your mortgage early or make overpayments that are more than your set limit, then you might incur an ERC as set out in your contract terms.

Arrangement fee

This is an administration charge that you pay to your lender in order to set up your mortgage. You can usually choose to pay this amount in full or add it onto your mortgage.

Booking fee

Also known as an application or reservation fee; a booking fee is required to reserve a mortgage deal. This amount is non-refundable and you’ll be expected to pay upfront when you’ve submitted your application.

Mortgage Types

Fixed rate

A fixed rate is where your mortgage stays at the same rate for a period of time. This means that you can be exactly sure what you will pay from each month to the next.

Variable rate mortgage

This is where your charges are in line with the mortgage lenders SVR. This means that some months you could be paying more whilst other months you could be paying much less.

Tracker mortgage

A tracker mortgage is a type of variable rate mortgage but most commonly tracks the movement of the Bank of England’s base rate. The amount you will be charged each month will be in line with this amount.

Capped mortgage

If you choose a mortgage with a capped rate then the interest rate will never exceed the cap set, regardless of any changes to the Bank of England base rate.

Offset mortgage

These mortgage types link to your savings account as well as your current account. This allows you to make overpayments each month, allowing you to pay your mortgage off more quickly. These types of mortgages are most suitable for high-earners who are able to save each month.

Interest-only mortgage

Interest-only mortgages allow you to only pay off the interest on the amount you borrow. At the end of your mortgage term, you use your savings or investments to pay off the rest of the amount.

Subprime mortgages

Subprime mortgages are for people who have a poor credit history. Higher interest rates are usually associated with these types of mortgages as conventional mortgages are seen as high risk as the customer is more likely to default on the loan.

Top tips for getting a mortgage

When you’re looking to buy your first home, getting a mortgage will be your top priority. You will want to do what you can to get the best chance of being approved. Here we look at the top ways you can increase your chances of getting a mortgage.

Top tips for getting a mortgage

When you’re looking to buy your first home, getting a mortgage will be your top priority. You will want to do what you can to get the best chance of being approved. Here we look at the top ways you can increase your chances of getting a mortgage.

1.     Check your credit score

Checking your credit report is the first thing you should do before applying for a mortgage. Lenders favour applicants with a good credit score, but there are still lenders who will consider your application if you’re suffering from a poor credit history or no credit history. Either way, it’s good to know what situation you’re in so you can work to improve your credit score if you need to. This means you can avoid any nasty shocks when applying for a mortgage as you will have a better idea of what you can expect. You will also be able to see if there are any errors on your credit file that need correcting before applying for your mortgage.

You can check your credit report easily through credit reference agencies such as Experian and Equifax.

2.     Work out your affordability

Before applying for a mortgage you should work out for yourself what you can afford to pay each month. Adding up how much you spend on monthly outgoings will allow you to see what you have left to use towards your mortgage. It will also allow you to see which areas you can cut back on or where you can make any lifestyle changes if you need to in order to be able to afford your mortgage payments.

Our online calculator can help you to work out how much you can borrow.

3.     Save as much as you can!

No matter how good your credit score is, or how low your monthly outgoings are; if you don’t have a sizeable deposit then it’s unlikely you’ll be able to get a mortgage at all. For more information about deposits take a look at our beginner’s guide to mortgages article.

You will also need to ensure that you have enough savings for other costs that will arise when buying a house. This includes any legal fees as well as stamp duty if the property is worth more than £125,000.

If you haven’t got one already, a savings account is essential when saving for a house. You should set up a direct debit from your current account to your savings account each month. If you think you might be tempted to access these savings before this point then you might want to consider a fixed rate bond.

4.     Carefully manage your bank accounts

Nothing looks worse to a mortgage lender than a badly managed bank account. Manage your money responsibly to ensure your bank accounts are in the best shape before applying for your mortgage. Don’t go overdrawn and make sure you pay off any credit card payments on time.

If you have any outstanding debts from previous loans then it’s a good idea to try and pay these off before applying for a mortgage. Lenders will want to see that you have as few debts as possible when applying for a mortgage. This will help with your affordability and also help to improve your credit rating. If you do have any large loan repayments to make then you should consider repaying these before making your mortgage application.

5.     Timing is everything

You should apply for your mortgage when your credit score and bank accounts are in good shape. If you’ve recently had more money coming out of your account than usual then it might be a good idea to wait a few more months so these transactions don’t show on your most recent payslips.

You should also try to avoid getting a mortgage if you’re between jobs. If you’re in your probationary period you are likely to be considered as higher risk by lenders. Some will only consider your application if you have been in your role for over a year. If you’ve started a new job in the last few months then it’s a good idea to wait until you’ve passed your probationary period until you apply for a mortgage. If you’re looking to change jobs then you should wait until your mortgage has been accepted before you apply for a mortgage.

You should also wait for the best time in your own life to get a mortgage. This is a huge financial commitment that you should make sure you’re ready for so make sure it’s right for you.

Beginners guide to mortgages

Getting a mortgage is probably the biggest financial commitment you will ever make. But if you’re a first-time buyer, you might not know where to start. Here we have outlined the main things you need to know about getting a mortgage.

Beginners guide to mortgages

Getting a mortgage is probably the biggest financial commitment you will ever make. But if you’re a first-time buyer, you might not know where to start. Here we have outlined the main things you need to know about getting a mortgage.

What is a mortgage?

A mortgage is a large loan used to help buy property or land. This makes up the difference between the total cost of the property and the deposit (lump sum payment). Interest and mortgage fees will be added onto the cost of your mortgage for borrowing the money.

Mortgages are secured against the value of your house until it’s completely paid off. This means that if you fail to keep up with your repayments then your mortgage lender has the right to repossess the property to sell and get their money back.

Do I qualify for a mortgage?

You can get a mortgage if you’re 18 or older and in full-time employment. Most lenders will require that you’re no longer in your work probationary period and that you have a good credit score. However, there are still options available for people who have a poor credit history.

How much can I borrow?

The amount you can borrow is based on your yearly earnings; as well as your partner’s earnings if you’re taking out a joint mortgage. Our online tool can help you work out how much you can borrow if you’re unsure.

No mortgage provider will allow you to take out a mortgage that you can’t afford. The lender will also want to see at least 3 months’ worth of bank statements to determine how much you can borrow for a mortgage.

How big a deposit should I put down?

Although there isn’t a set amount that you have to put down as a deposit, most lenders require around 20% of the house’s value. For example, if you’re looking to purchase a £200,000 house, then you should look to put down a deposit of £20,000.

The bigger the deposit you put down, the cheaper your mortgage repayments will be as you will have a smaller mortgage to pay back.

Consider your LTV (Loan to Value)

A larger deposit will reduce your LTV (Loan to Value), allowing you to get a better deal. Your LTV is the size of your mortgage in relation to how much your property is worth. High LTV mortgages (above 80%) won’t guarantee the best interest rates as these are considered riskier for lenders.

If you’re in a position where you need to secure a high LTV then you’re more likely to get approved if you have good credit score.

How much will I pay each month?

Your monthly repayments will be based on a number of factors. This includes your LTV, the type of mortgage you take out and the length of the term:

Types of mortgages

Fixed rate mortgage – Where the interest rate stays the same for a set period of time, as do your monthly payments.

Variable rate mortgage – Where the interest is set at the lender’s SVR (Standard Variable Rate), considered as their basic mortgage.

Discount mortgage – This is the same as a variable rate mortgage but a reduction is applied for a certain length of time.

Tracker mortgage – This is similar to a variable rate mortgage but instead, they track a nominated interest rate, usually the Bank of England’s interest rate, rather than the lenders SVR.

Capped mortgage – This is also the same as a variable rate mortgage, however, the interest rate can never rise above a set “cap”.

Offset mortgage – These mortgages are linked to a savings account as well as your current account. Each month the lender will look at what you’ve put into savings and deduct this from what you owe on your mortgage.

Whichever type of mortgage you agree to, you will be contracted for a number of years before you are able to renew or remortgage by going elsewhere to get a better deal.

Mortgage term length

On average mortgages run for 25 years, but terms can be longer or shorter than this depending on your situation. As affordability is more prevalent with house prices increasing, many people are choosing mortgages with longer terms in order to get a lower monthly payment.

If affordability isn’t an issue for you then choosing a shorter term could be a better option as you will pay less in interest over time.

If necessary, you can extend or reduce your mortgage term; however, there may be an additional cost to this. You should always ensure that you can afford the change in monthly payments if you choose to change your term.

Applying for a mortgage

The process of applying for a mortgage is relatively straightforward. You will need to provide information about yourself as well as information about the property you are looking to purchase.

When applying for a mortgage you should avoid making multiple applications in a short period of time. This is because lenders will be able to see each of these on your credit file, suggesting that you might be desperate for finance.