Factors Affecting a Mortgage Application

Posted on September 17th, 2014 by Toni Burns

There are certain factors that one should be made aware of when applying for any type of mortgage from the bank or building society. 

These factors will affect the outcome of your application as they all have an influence on the final decision when a lender is checking an applicant’s criteria so that the Equated Monthly Instalment proves viable.

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Now more than ever with the FCA introducing the MMR nearly 6 months ago plus lenders also having to adhere to stricter regulation, affordability checks have become much more stringent.

A typical lender will probably limit monthly repayments to no more than half of the borrower’s income. They will take into consideration any other loans you are still indebted to as this will ultimately have an effect on their equation. 

Many financial institutions also wish to know if the borrower has any dependents and if so how many as the probability factor of affording the loan repayments will further reduce.

The Intermediary Mortgage Lenders Association has just released content from research they recently conducted that reveals loan applicants who fall into the lower income bracket with dependents have been the most affected by the MMR.

A borrower who is self-employed will most likely find the loan process even more difficult than that of a standard employee fetching in a regular income. A lender often perceives them as more of a risk, even though that is not always the case. 

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Another ingredient that gets thrown into the melting pot is the age of the potential borrower. The older they are, the less years they have left to repay the amount loaned. Therefore the term of the mortgage will shorten, meaning that monthly premiums are higher. If an applicant is approaching retirement, the loan will normally cease by then.

However if the borrower has a younger partner, it may be practical and more beneficial to use them as a co-applicant. expidoms . This will not only help the length of the loan, but also the two incomes may be fused together, thus being eligible for a higher loan amount.

Lenders will also look at the Loan to Value ratio of the property. The majority of banks limit the LTV at around 75 per cent. The higher the sum borrowed, the higher the interest rate that is offered.

If you are fortunate enough to have a faultless credit rating and are looking to borrow from a bank or building society that you have been associated with for many years, do not be afraid to negotiate over the rate that they are asking for.

Some banks may be more receptive if you start the loan before a new month begins. It can be advantageous for them in order to help reach their monthly figures. 

Finally, whoever you decide to take the loan with, it is wise to be especially clear about anything that can be classed as a default further down the line as far as you’re concerned. The document you sign will have a lot of technical jargon, but is not always ‘one size fits all’. Therefore look at any specific details relating to this point. 

About the author

Toni Burns Toni Burns is a Digital Marketing Specialist at Cash Sorted and writes the majority of our informative blog posts. She keeps on top of the finance industry and reports back on any changes that could affect our users. Toni loves skiing, eating out & listening to music.

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