The coronavirus pandemic has changed many aspects of our daily lives, with everyone taking steps and precautions to work together to prevent the spread.
In uncertain times, banks and lenders are examining their products and the level of risk involved. A number of mortgage products have been withdrawn from the market, mainly those with a high loan to value (LTV), that being the percentage of the property’s value that you need as a mortgage.
Mortgages with a high (LTV)- for example a 95% LTV mortgage where you provide 5% of the property’s value and your lender loans the other 95% – are often considered a bigger risk to the lender and would most definitely require a valuation of the property. As these need more human interaction and intervention than mortgages with lower LTVs, making it difficult for lenders to find a risk-free way of continuing these products.
Many lenders found that, with in-person valuations being made impossible with the initial lockdown rules, offering high LTV mortgages became a much higher risk and providing them was less feasible in the current climate. Lots of mortgage deals with an LTV of over 70% offered through many major banks, such as Halifax and Barclays, were temporarily withdrawn. This doesn’t mean it’s impossible to get a higher LTV mortgage, it just means less are being offered and the criteria will most likely be stricter so the lenders can efficiently manage risk and valuation requirements. Not all lenders have chosen to do this so dramatically though, with Nationwide only limiting the cap to 85% LTV for first-time buyers and remortgages. With different lenders taking different approaches to managing the changes presented due to the pandemic, more than ever mortgage brokers are a valuable tool for those seeking to purchase a home, keeping constant track of the different LTV ratios for each lender and helping customers navigate a rapidly changing market.
Improving your chances of getting a mortgage after Covid 19
With the housing market back open – under strict social-distancing guidelines – and valuations able to re-commence, some higher LTV mortgages are beginning to return. With estate agents able to reopen, buyers have been able to look towards viewing properties, removal firms have been able to resume work and the housing market is starting to flow again – however it’s important to remember that social distancing and following guidelines is essential to ensure the purchase and sale of property can be done safely.
It’s been reported by Rightmove that the interest for “home-mover visits” hit 5.2 million, up 4% from the same day last year. Miles Shipside, Rightmove director, said the figures show “clear signs of returning momentum” which means those who have been thinking forward and looking to move home are not alone. With many of us looking to life post-lockdown and making plans for the future, it makes sense that there’s an increase in people wanting to own their own home. Click here to read the article.
If you want to increase your chances of getting a mortgage, luckily there’s plenty you can do to help prepare your application and prove you can be a responsible borrower- even with bad credit.
Also, read our article on the first steps of easing lockdown
Income
Having a stable income is important when applying for a mortgage. Lenders will want to know you’ll be able to meet repayments, and your income is usually how you’ll do this. It’s usually best to have been working in the same job or field for at least 3-6 months before applying for a mortgage, but some lenders can be more flexible. Even with furloughed income, a lender will consider this on a case by case basis.
Electoral Roll
Registering to vote on the electoral role is the simplest, yet one of the most vital steps in preparing your application. Lenders will use data from the electoral roll to verify your identity, making sure your address on your application matches the one you’re registered to vote at.
You can register here: – and it only usually takes around 5 minutes.
Paperwork
Get your paperwork in order. This could be things like:
- Proof of income – this could be payslips or your accounts
- Expenditures – your lender will want to know you can afford your repayments. Any regular outgoings need to be accounted for, check your bank statements for any outgoings that you don’t need and could possibly cancel?
- Identity – you’ll need to authenticate your identity so make sure you have the relevant documents, usually a passport or driving licence, but other documents can be used.
- Proof of deposit – you’ll need to verify your deposit, but this can usually be done fairly easily – for example through savings accounts statements
- Proof of address – e.g. utility bills, council tax statements
Credit Score
Your credit report is how a lender can see if you’re a responsible borrower and plays an important part in your mortgage application. You could still get a mortgage with bad credit (or even no previous credit), but if you’re looking to prepare an application, taking a look at your credit report and working to improve it will increase your chances of being accepted.
- Use of available credit – the amount of credit available to you and the amount your utilising will have an impact on your credit score. Make sure you’re borrowing responsibly and don’t take out credit you don’t need.
- Close old and inactive accounts.
- Check for irregularities – if there’s something you don’t recognise or disagree with you can raise a dispute with the lender or the company providing your credit report.
- Make sure you pay your bills and any credit repayments on time. Missed payments appear on your credit report and can impact a mortgage application.
If you’ve had to take a payment holiday as a result of financial impacts from the coronavirus epidemic, provided the payment holiday was agreed with your lender this shouldn’t impact your credit score or prevent you from taking out credit in the future. This includes mortgage payment holidays, car finance payment holidays and even some payday loan repayments. However, it is worth noting that payday loans rarely reflect well on a mortgage application and if you’re looking to apply for one, waiting until payday loan use has dropped off your credit file could boost your application.
Save a deposit
As mentioned above, there aren’t as many 95% LTV mortgages available right now so you might need to save for a larger deposit. You should usually aim to save at least 5% of the property’s value but a larger deposit reduces the risk to the lender which increases your chance of being accepted and could give you access to better rates or deals.
We’ve helped 1,000’s of customers get the perfect mortgage – specialising in helping people with bad credit. Get in touch with one of our advisors to find out more.
