What is a 95% Mortgage?

A 95% mortgage is as simple as the name would suggest; you are borrowing against 95% of the price of a property, and then you are covering the remaining 5% with your deposit. An example of this is if you looked at buying a property that was worth £150,000 with a 95% mortgage, you would be putting down £7,500 as your deposit and borrow the remaining £142,500 from the lender. 

95% Mortgage Advice in Harrogate

Off the back of the March 2021 Budget, Boris Johnson announced a Mortgage Guarantee Scheme for mortgage lenders, making 95% mortgages more readily available from the bigger high street banks.   

This is fantastic news for First-Time Buyers and Home Movers alike, as this scheme will continue running until December 2022. Certain terms and conditions will apply though, which is something your Mortgage Advisor in Harrogate will be able to look at, to see if you qualify.    

All our customers who opt to Get in Touch will receive a free, no-obligation mortgage consultation where one of our dedicated mortgage advisors will be able to make a recommendation on the best possible route for you to take.

Can I get a 95% mortgage?

95% mortgages are usually accessible by both First-Time Buyers in Harrogate & those who are Moving Home in Harrogate. Whilst saving for a 5% deposit sounds like a pretty straightforward concept, you’ll still need to have an acceptable credit score and prove that you are able to afford your monthly mortgage repayments, in order to access a 95% mortgage.

Improving your credit score

A good credit score is essential in the process of obtaining any mortgage, especially a 95% mortgage. Things like paying any current credit commitments on time, ensuring your addresses are updated and checking that you’re on the voters roll, can all help with your credit score.

Affordability 

Affordability is another one that is important to take note of. By giving the lender details of your income and monthly outgoings (things like your bank statements will be necessary for this) and any pre-existing credit commitments, your lender will be able to get a general overview of whether or not you are able to afford this type of mortgage.

Can my family help me get a 95% mortgage?

Nowadays we see lots of family members helping each other get onto the property ladder, especially parents looking to further their children’s lives. The way this usually happens is by gifting the person looking to find their home, the deposit required. Known through the industry as the “Bank of Mum & Dad, Gifted Deposits are only intended to be a gift, and not as a loan. The lender will need proof that this has been agreed, before it can be used towards your mortgage. 

How do I choose the right 95% mortgage?

When looking for a 95% mortgage, you want to make sure you have the right type of mortgage. Each mortgage type works differently, with that choice allowing you to find one that is most appropriate for your personal and financial situation. 

Some homeowners and home buyers prefer Fixed Rate or Tracker Mortgages, mortgage types which mean you either keep interest rates at a set amount for the term given or have your interest rates tracking the Bank of England base rates.

Alternatively, you might find that Interest-Only or a Repayment Mortgages are more your style. Interest-Only allows cheaper payments until you need to pay a lump sum at the end (mostly now used for Buy-to-Lets), whereas a Repayment mortgage (a normal mortgage if you’d like) means you’ll be paying interest and capital combined per month.

How can a bigger deposit help with my mortgage? 

Seeing as a mortgage is such a large financial outgoing, you need to be prepared and need to be aware. You might find things like higher interest rates, remortgaging difficulties due to less equity and then negative equity all cropping up if you’re not. 

There is no need to worry though, as all these can be avoided if you’re savvy enough with your process to begin with. The more deposit you put down for a property, the less risk the lender will see you as. 

A larger deposit, of say 10-15%, would not only reduce the rates of interest by a noticeable amount, but would also give the property more equity and reduce the risk of negative equity, thanks in part to you borrowing less against the property. 

So, whilst the risks may seem intimidating, planning ahead and saving for a bigger deposit to access something like a 90% or even an 85% mortgage will be a massive help in your mortgage journey and something you’ll be able to reap the rewards from in the future. 

How to Improve your Credit Score in Harrogate

Mortgage Advice in Harrogate

What is a credit score?

A credit score is a tool that lenders use to measure whether or not an applicant can afford a mortgage or not. The higher your credit score, the more likely it is that you’ll get accepted for a mortgage. Which means that if you have a low credit score, your chances of getting a mortgage are lowered.

Having a high credit score may sound great, however, it doesn’t guarantee you a mortgage in any way. Each lender has their own unique lending criteria and it’s more than likely that you won’t meet all of them. Sometimes it’s down to your circumstances and not just your score.

Matching lender’s criteria

It is more than likely that each lender will have completely different lending criteria. Lenders have almost carved out their own niche market. You could end up matching with lots of lenders or it may only be a couple, but all that matters is that you match with one and get an amazing mortgage deal from it!

Whether you receive help from a Mortgage Broker in Harrogate or go solo and use your bank, it’s their job to help you compare deals and match you with a lender.

As a Mortgage Broker in Harrogate, we would always recommend taking up our free mortgage consultation offer. This way, we can evaluate your situation and compare deals for you straight away. If you go to a bank, you could just be added to a waiting list.

If you are struggling to match a lender’s criteria, it could be down to multiple things or maybe just one. The most common reason why people don’t match their lender’s criteria is that they have a low credit score. If this is your situation, then you need to find some ways to improve your credit score.

Improving your credit score

Avoid unnecessary credit searches

Having unnecessary credit searches on your file could negatively impact your credit score. Lenders don’t particularly like seeing repeated credit checks; they may think that there is a reason behind it and they may even start asking you questions about it. Even using price comparison websites could damage your score.

On another note, if you are applying for a mortgage, it is unwise to apply for any form of extra credit in the meantime of your application.

If you manage to pay back owed money before your application, it will look good on your file, however, if you are borrowing/paying back money during your application, it will have a reverse effect. If you borrow credit, some lenders’ could think that you cannot afford the deposit and are relying on the credit to help you.

Are you registered on the Voter’s Roll?

A great way to improve your credit score is to register onto the Voter’s Roll. Lenders love seeing applicants that are registered on it as it indicates stability. It’s really easy to get yourself registered and the fact that it can boost your credit score surely means that you have to sign up if you haven’t before!

Even if you are already registered, it’s always a good idea to double-check that you have entered all of your information correctly. If you have an old address on their system, lenders will easily spot this mistake and it could go against your score.

Don’t run too close to your maximum limit

Maxing out your card each month will have a detrimental effect on your credit score. If you are using a credit card, a lender would much rather that you pay off the full balance each month rather than cutting it short. Showing you can meet set payments each month shows reliability and can help your chances of being accepted for a mortgage.

On the other hand, if you are doing the opposite and exceeding your credit limits or overdrafts, your lender will think that you don’t take your finances seriously. This could massively impact your credit score, especially if you get declined by a lender due to this reason.

Check that your address is up to date

Your address should always be up-to-date. People usually get caught out when they move out from their parent’s house and forget to update all of their address’.

If you forget to change your address on things such as credit accounts, it will appear that you are living in two separate places. This can hurt your credit score once lenders see this so make sure that you are keeping on top of what address’ are linked with each of your accounts.

Close down your unused credit accounts

If you have any store/credit cards that are no longer in use, you should contact the provider and get them to fully close down your old account(s). These types of accounts are probably doing more damage than you think.

However, if you manage to close your account(s) it could still have a negative effect on your credit score as the credit reference can’t really tell if it’s you closing the account or the provider.

Don’t worry about this, if they ask, you will have to explain and it could work in your favour as you are proving that you want to improve your chances of being accepted.

Remember that it’s always good to check up on these types of things just in case. For example, you could’ve lost a card and you didn’t realise, then you fall victim for fraud. This could end up having a worse effect on your score.

Remove your financial link to others

People often don’t know that they are still financially tied to a family member or ex-partner. If this is the case, it can have a negative effect on your credit score without you even realising.

If the account that you are still tied to is still active, you must know that you will not be able to remove your link just yet. If you want to remove any of these links, then you should get in touch with the credit reference agencies and make a request.

Summary

As a Mortgage Broker in Harrogate, we know that some applicants see credit scoring as an unfair way of determining whether or not you’ll get accepted for a mortgage. For example, you may have a low credit score due to personal circumstances that couldn’t be prevented.

As a Mortgage Broker in Harrogate, we mostly see that it’s people that are Moving Home or Self Employed struggle with their credit score. However, if this isn’t your mortgage situation and you still need help with improving your credit score, you know to get in touch with.

Sending an up-to-date credit report to your expert Mortgage Broker in Harrogate could prove extremely beneficial to your mortgage journey. A great tool that we always recommend to our customers is checkymyfile.com.

The more your advisor knows about your finances the better. There are still some lenders out there that prefer to do things the old-fashioned way and will manually assess your application. They will still have rules that they stick by about the number of defaults and CCJ’s that they will allow.

A Mortgage Broker in Harrogate, like us, likes to do things the new way and will always aim to deliver you the same fast and friendly mortgage advice service that you are all used to. We hope to hear from you soon.

In need of a Mortgage Agreement in Principle in Harrogate?

The purpose of an Agreement in Principle (AIP) is to determine whether or not you pass a Lender credit score to qualify for a potential mortgage. Sometimes this is also referred to as a Decision in Principle.

By obtaining yourself an Agreement in Principle, you are ready to support any potential offers you make as a First-Time Buyer in Harrogate. Having one of these may also put you in a place to negotiate a lower price as it shows the seller you are serious and have the means to proceed with the purchase.

Will obtaining an Agreement in Principle impact my Credit Score? 

Common practice these days seems to lean more towards soft searches, though even these could still affect your credit score. Usually this would be more likely with a hard search, with soft searches generally leaving your credit score unaffected.

The difference between the two, is that a soft search won’t dig as deeply as a hard search. You can always rest assured though that the lender has chosen either with the best of intentions.

Should I stay away from hard credit checks? 

Now and again a hard search or two should be fine. It becomes slightly more problematic if you start having multiple hard searches over a short amount of time. Soft searches won’t show up on your credit report, but a hard search will. This looks bad, especially if you don’t pass the different criteria.

Don’t let this put you off however, as if you know you know you have a good credit score and taking a hard search with that lender is the best deal, you’ll most likely be fine.

Does my Agreement in Principle a guarantee that I will get the Mortgage? 

We really wish it were the case, but sadly no, there are no guarantees that having an Agreement in Principle will get you a mortgage. You still need to present the lender with your documents and it’s only then, that the underwriter will make the final decision on your case.

A regular occurrence here at Harrogatemoneyman, is customers getting in touch after being declined at application stage. This is often down to missing some of the small print mentioned in their Agreement in Principle. You will need to provide identification for proof of who you are, payslips for proof of income, and bank statements for proof of handle your finances the right way. Without these, your case won’t go to offer.

Can I make an offer without having an Agreement in Principle? 

If we were to get technical, the answer is yes you can. However, it is highly unrecommended and any credible estate agent will not proceed without proof that you can proceed.

How long does is the process of getting an Agreement in Principle? 

Within 24 hours of speaking with a mortgage advisor in Harrogate it is possible to obtain an Agreement in Principle.

How long will an Agreement in Principle last?

Generally speaking, an Agreement in Principle will expire around the 30-90 days mark. The good thing is though, that this doesn’t mean you should just apply for the first house you find. If your Agreement in Principle expires, it is relatively straightforward to have it refreshed when you are ready to make an offer on a property.

Finding a mortgage only to be declined a mortgage can be a major disappointment, we get that. We recommend getting an Agreement in Principle as early as you can to avoid that disappointment.

Preparing for a Mortgage Application in Harrogate

Applying for a Mortgage | Mortgage Advice in Harrogate

So, you’ve saved up for your deposit (or got the green light from “Bank of Mum and Dad”) and made the decision to move home in Harrogate.

What’s the next step? It’s time to get prepared for your mortgage with our Mortgage Advisors in Harrogate.

Know where you stand

Speaking to an experienced Mortgage Broker in Harrogate as early on in the process as possible will be beneficial as you know how much you can borrow for a mortgage and how much it will all cost.

Obtaining an up to date credit report should also be at the top of your list, you don’t want a meaningless squabble with your mobile phone provider holding you back from buying a home.

Taking the above two steps will give you a meaningful expectation of how possible this is going to be and what your budget is.

Getting Organised

Your Mortgage Broker in Harrogate will obtain a fully credit-checked Agreement in Principle on your behalf but you’ll have to prove who you are, where you live and how much you earn.

There really is loads of paperwork for you to get together so it’s a good idea to open a file for yourself and start collecting everything in advance.

Proof of ID

In terms of proving who you are you’ll need to produce some photo ID such as a Driving license or passport, if you’re a non-UK national working over here on a Visa you’ll need that too.

Proof of Address

In addition to the above, you’ll need to prove where you live. You’ll need to produce a utility bill or original bank statement dated within the last 3 months.

Last 3 months’ bank statements

Further to the Mortgage Market Review of 2014 the analysis of your spending habits has become one of the most important determining factors in whether you’ll qualify for a mortgage or not.

Your bank statements should evidence your income and regular expenditures.

Lenders will not be happy to see gambling transactions on your account and nor will they like it if you go over an agreed overdraft limit or if your direct debits bounce regularly.

Proof of Deposit

You will have to prove you have the funds in place for the deposit and also evidence this for anti-money laundering purposes.

Try not to move money around your various accounts too much as it will make evidencing the audit trail more difficult. Lenders like to see your savings building up so you’ll need to account for any large credits into your accounts.

Quite often money for deposits has been gifted by family members. These funds need to be evidenced also and the “donor” will need to sign a letter to confirm it’s a non-refundable gift, not a loan.

Proof of Income

In terms of affordability, the most important thing is to be able to prove your income. If you are employed this tends to be by way of your last 3 months’ payslips and most recent P60. Lenders can take into account regular overtime, commission, shift allowance and bonus.

If you are Self Employed then you’ll need your Accountant’s help to request your tax year overview.

A list of your expected outgoings

It’s a good idea to do your homework and write down an estimate of your anticipated outgoings after you move house. You can work out an idea of how much the council tax and utility bills will be plus your regular expenditures such as food and drink and demonstrate how much disposable income you have available to pay your mortgage from.

As you can see from the above, it’s a real paper trail when you are applying for a mortgage but if you want your application to run like clockwork you’ll need to put the time aside to get everything together.

It’s better to get all this at the outset and collate everything that the Lender could possibly ask for. As this saves time and frustration later down the line if you’re subsequently asked for paperwork you could have had ready at the outset.