In this brief guide, we are going to discuss how to get a mortgage, what you can do to improve your chances of getting a mortgage.
How to get a mortgage
This is how to get a mortgage in the UK. To get a mortgage in the UK you will usually need a mortgage deposit of at least 5% although there are mortgages which you can get with 0% mortgage deposit (these are known as family deposit mortgages) and if you are struggling to save a mortgage deposit then you may be able to get a government scheme which can help you increase your mortgage deposit or reduce the cost of the home you are trying to buy. We will elaborate on this below.
You will also usually need an income which is x3.5 of it is less than the mortgage you are trying to get.
This is known as your mortgage multiple. Mortgage lenders will usually only lend a max of x4 of a borrower’s income but each mortgage lender has its own mortgage multiple and you may be able to get a mortgage lender who lends up to x5.
To get a mortgage in the UK you will also need the following documents:
Your bank statements for 3 months
Your utility bills
Your identification documents such as your passport
Your P60 payslips for3 months
Your SA302 tax return if you are self-employed
Your tax return documents
An accountants certificate for mortgage if you are self-employed
Your self employed accounts if you are self-employed
Proof of benefits if you receive benefits
Authority to proceed letter if you are getting a government scheme
The above documents will make it much faster for you to get a mortgage as your mortgage broker and the mortgage lender will usually require you to submit these documents.
You should note that a lot of mortgage applications are now becoming digitised and you may not need to physically produce some of these documents but rather send online copies. In some cases e.g Bank statements you won’t need to provide any documents but rather access to your bank account through a secure medium known as open banking.
This will allow the mortgage lender or mortgage broker to analyse your banking transaction data in seconds and let you know if you can get a mortgage or not.
The mortgage lender will look to see what your monthly disposable income is and if you can afford to make monthly mortgage repayments on your chosen mortgage amount.
To find out how much mortgage you can afford you can use a mortgage affordability calculator or speak to a mortgage broker who will assess your finances in much more detail.
The steps on how to get a mortgage are:
See what you can afford
Find a property
Find a mortgage broker
Get a mortgage in principle
Get a property offer accepted
Get a mortgage offer
Exchange contracts with the seller
Complete the mortgage
Family deposit mortgages to get a mortgage
Family deposit mortgages can allow you to get a mortgage by putting no mortgage deposit down.
Family deposit mortgages work by allowing your family members to deposit around 10% of the property price in a linked savings account for a minimum term such as 3 years. This will serve as your mortgage deposit. In some cases, the mortgage lender will use this to offset the interest you may on your mortgage such as with an offset mortgage.
There are a various number of mortgage lenders which offer family deposit mortgages they include:
“ Each one of these mortgages works in its own unique way. We will briefly define how they work and what some of their benefits are.
The Barclays family springboard mortgage
The Barclays family springboard mortgage is a type of family deposit mortgage where your family members or friends put away 10% of the property price in a Barclays saving account over 3 years for a fixed interest rate. This means you will get a 90% loan to value mortgage.
You get a fixed rate on your mortgage for 3 years and after the 3 years, you move on to the mortgage lenders standard rate.
Your family member will get back their savings plus interest after 3 years if you have made all your mortgage repayments on time.
If you have not made all your mortgage repayments on time or defaulted on your mortgage then the home could be repossessed and your family members may have their funds held for much longer.
The Lloyds lend a hand mortgage
The Lloyds lend a hand mortgage is a type of family deposit mortgage which is similar to the barclays family springboard mortgage where a family member puts away 10% of the property price in a Lloyds saving account for 3 years at a fixed interest rate. This means you will get a 90% loan to value mortgage.
The Lloyds lend a hand mortgage will then allow you to get a fixed-rate mortgage fo the first 3 years after which you will move over to the mortgage lenders standard variable rate.
Your family member will then get their savings back after 3 years if you have made all your mortgage repayments on time.
If you have missed your mortgage repayments then the mortgage lender may hold your family members funds for much longer. This could also be the case if you have defaulted on your mortgage and the property has been repossessed.
The post office family link mortgage.
The post office family link mortgage is a type of family deposit mortgage where your family member uses 10% of a mortgage-free property to fund your mortgage deposit. You and the family member will be on the deed of your new mortgage and the mortgage lender will offer you a mortgage with a loan to value of 90% meaning you don’t need to pay any mortgage deposit towards this specific type of family deposit mortgage.
For the first 5 years of the mortgage, you will make two payments. One towards your family members 10% equity which is an interest-free advance to you. You make the second payment towards your 90% loan to value mortgage.
After the first 5 years, you will revert back to making one mortgage repayment towards your mortgage.
The family deposit mortgage by the Nationwide building society is a type of family deposit mortgage where your family member needs to already have a mortgage with the Nationwide building society. Your family member can then borrow more to fund your mortgage deposit but you will then need to get a mortgage through the nationwide building society.
The family mortgage from the family building society is a type of family deposit mortgage where your family member can use the equity in their home or their savings as security for your mortgage so you can get access to mort affordable first-time buyer mortgage rates.
You will still need to put down a mortgage deposit of at least 5 % and your family members can provide security of up to 25%.
They can do this in one of three ways:
Use the equity tied up in their home with the Security Through Property option provided by the family building society
Deposit money in a savings account that earns interest with a Family Security Account
Deposit money in a Family Offset Account that doesn’t earn interest but reduces the cost for the borrower by reducing the mortgage on what interest is charged
A family deposit mortgage from the Loughborough building society
The family deposit mortgage from the Loughborough building society is a type of family deposit mortgage where equity in your family members property or their savings can be used as a security for your mortgage and in some cases both.
You may be able to assess up to 100% loan to value rates from the Loughborough building society family deposit mortgage.
Guarantor mortgages to get a mortgage
There are also guarantor mortgages where a guarantor will either put down some collateral such as their property as a guarantee on your mortgage. In some cases, some mortgage lenders may find this sufficient enough for you to get a mortgage with no mortgage deposit down.
The downside is that if you default on your mortgage then it is almost certain that the mortgage lender will repossess your property and whatever collateral the guarantor has put down in order to recover the mortgage balance outstanding.
Government schemes to get a mortgage
To get a mortgage these are the government schemes which may enable you to get a mortgage. You can check if you are eligible for these government schemes by using a government scheme eligibility calculator.
- Lifetime ISA– gives you a government bonus of £1,000 if you save the maximum £4,000 a year.
- Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
- Help to buy equity loan- gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
- Shared ownership- You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
- Armed forces help to buy- similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
- Rent to buy- This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
- Right to buy- allows you to buy your home at a discount price.
- Preserved right to buy- same as above.
- Right to acquire- same as above.
Depending on where you live, you may also be able to take advantage of home buying schemes provided by your local council. Example: In Norwich, the local councils provide the Norwich home options scheme.
A Job to get a mortgage
To get a mortgage you will usually need to have a regular income but there are mortgage lenders who may consider unusual or complex incomes for mortgages.
Mortgage lenders usually lend in mortgage multiples as mentioned above.
These mortgage multiples are based on your annual income. Hence if you have a mortgage lender who has a mortgage multiple or income multiple of 4 and you want a £200,000 mortgage then you will need to earn at least £50,000 per year.
As mentioned above you can boost your mortgage affordability and ability to borrow with a low-income if you can increase your mortgage deposit using the government schemes above or by using special mortgage products such as the family deposit mortgage.
To see how much mortgage you could get you could use a mortgage eligibility checker or a mortgage affordability calculator.
A mortgage deposit to get a mortgage
A mortgage deposit is usually a strict requirement to get a mortgage. Most mortgage lenders will require at least 5% but the standard used to be 20%. As mentioned above you may be able to get help with your mortgage deposit by using one of the government schemes mentioned above.
Your mortgage deposit determines the loan to value you will get on your mortgage and this, in turn, determines your mortgage rate. Usually, the more mortgage deposit you put down the smaller your mortgage rate will be.
Your loan to value rate is the ratio between the mortgage the lender gives you and the value of the property. The difference is usually your mortgage deposit although in the case of concessionary mortgages your mortgage deposit could be less.
The mortgage rates are therefore usually tied to the loan to value rates.
Mortgage lenders usually allocate the best mortgage rates to those with the lowes loan to value rates. A 90% loan to value mortgage may receive a much higher mortgage rate than a 60% loan to value mortgage.
The mortgage deposit requirement from the mortgage lender will also depend on your circumstances.
If your mortgage affordability is low due to bad credit, a small income or being self-employed then you may find that the mortgage lender will increase their mortgage deposit requirements in order for you to get a mortgage.
A reasonable credit score
To get a mortgage you will also usually need a reasonable credit score although you may still be able to get a mortgage with a bad credit score. Most mortgage lenders rs=eserve their best mortgage rates for those with the best credit score.
If you are unsure of what your credit score is then you should check your credit score from the four credit bureaus in the UK: Experian, Crediva, Equifax and Transunion.
Some of these credit bureaus may charge you a fee to view your credit report so what you can alternatively do is request a statutory credit report which is a free credit report which each credit bureau must provide to you upon you requesting it.
Alternatively, you can also use credit score services such as Checkmyfile and clearscore to check your credit report.
If you have bad credit then you may find it much harder to get a mortgage and need to use a bad credit mortgage broker.
Some of the things you could do to increase your credit score will be:
Get a credit builder card to show good repayment behaviour
Get a secured credit card to show good repayment behaviour
Get a credit builder loan to show good repayment behaviour
Keep your financial accounts open as long as possible
Get on the electoral register
Avoid missed credit repayments
Avoid late credit repayments
Keep your credit utilization below 30%
Report your rental payments to the credit bureau
Avoid being rejected for credit
Avoid applying for too much credit in a short space of time
You should start doing these a few months(if not years) in advance of when you want to get a mortgage.
FAQs: how to get a mortgage
Below are some of the most frequently asked questions on how to get a mortgage.
How do I know if I qualify for a mortgage?
To know if you qualify for a mortgage you should check with a mortgage broker or a mortgage adviser in the mortgage lenders branch. You could also use a mortgage affordability tool to see if you qualify for a mortgage.
How long do you need to be in a job to get a mortgage?
You need to be in a job to get a mortgage for at least 3 months as most mortgage lenders request to see your last 3 months payslip before you can get a mortgage. There are mortgage lenders that will insist that you need to be in a job for at least 6 months.
Can a single person get a mortgage?
Yes, a single person can get a mortgage. There is no restriction on single people getting mortgages and they are not treated differently by mortgage lenders.
What kind of mortgage can I afford on my salary?
The kind of mortgage you can afford on your salary will depend on the mortgage lenders income multiple. Some mortgage lenders offering multiples of 3 whilst some go as high as 5.
Income multiples are essentially the maximum a mortgage lender will lend to you.
A mortgage lender with an income multiple of 4 will lend £200,000 to you if you had an annual income of £50,000.
How much income do I need for a 200k mortgage?
The amount of income you need for a £200k mortgage will heavily depend on the mortgage lenders income multiple.
If you get accepted by a mortgage lender with an income multiple of 4 then you will need an annual income of £50,000. A mortgage lender with an income multiple of 5 will require you to have an annual income of £40,000.
Use a mortgage calculator
Use a mortgage broker to get a mortgage.
You may want to consider using an independent mortgage broker to get a mortgage.
Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases. This could be over 11,000 mortgage products. This may have some advantages than going directly to a mortgage lender.
This isn’t the only benefits of mortgage brokers. Mortgage brokers could specialize in various types of borrowers e.g self -employed borrowers, bad credit borrowers, complex income borrowers etc.
A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you.
After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your remortgage is indeed a possibility before you make a full mortgage application. Once you have found a home you want to buy or are satisfied with the mortgage offer for your remortgage then the mortgage broker will then look to get you a mortgage offer.
This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month if there are any limits such as early repayment fees, or annual overpayment limits.
If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer. Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it, they will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.
In this brief guide, we are discussed how to get a mortgage. If you have any questions or comments then please let us know.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.