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Is there anything I can do with my finances to get a better mortgage rate?
Our reader asks: Mortgage rates are high at the moment making repayments less affordable. I’d like to buy my first home for around £250,000 and have 10% for a deposit, but is there anything else I can do that would potentially get me a better rate?
John Davison from Perenna replies: When you apply for a mortgage, the lender wants to see that you can afford the repayments now, and in the future.
Getting your finances in shape ahead of applying for a new mortgage or a remortgage can really help.
Doing this can give you more lenders to choose from and access to more product options.
My top tips are:
- Ensure that you are on the electoral register (sometimes called the electoral roll) and that all your bank accounts, loans, and credit agreements are registered at your current address. This helps the lender get a clearer picture of your finances and can prevent issues later in the process.
- Make sure you aren’t just making the minimum payment on credit cards. Affordable, well managed debt isn’t necessarily an issue if the lender can see that you are repaying it and can afford the debt alongside the mortgage.
- Don’t order that new sofa yet! If you plan on taking out more credit, don’t be tempted to order it before you move in. Any changes to your credit file or your expenditure could affect the lenders decision to offer you a mortgage or reduce the amount they are willing to lend.
Once you have completed a spring clean of your finances, use a broker – different lenders will use different affordability calculations and assess your circumstances differently. A broker can help you find the most suitable product for your needs and circumstances.
Remember, rate isn’t everything – different mortgages offer different levels of security and product features that may suit your circumstances better.
Work to a budget and ensure that whichever mortgage you choose, it works for you now and in the future. Your broker should take time to fully assess your needs and risk appetite before recommending the right product for you.