When you’re planning to move home, getting your finances in order is crucial. It not only helps the process run smoother but can mean you get a better mortgage deal too. Whether you’ll be buying your first property or moving up the ladder, getting your finances together should be considered a priority.
Here are seven tips you can implement:
- Keep an eye on your credit rating
When you’re looking for a new mortgage deal, checking your credit score should be a priority. It’s a rating that lenders will use to assess how risky you are. A rating that’s considered poor could mean your application is rejected, while one that’s good could give you access to the most competitive rates.
Ideally, you should review your credit score around six months before making an application for a mortgage product. This gives you plenty of time to correct mistakes and take steps to improve it where necessary. It’s a crucial factor whether you’re a first-time buyer or are nearing the end of your mortgage term.
- Pay off unsecured debt
As much as possible, paying off unsecured debt should be a step you take. Firstly, they’re likely to have high levels of interest that means you’re paying out more. Secondly, unsecured debt will often make you appear riskier to lenders, even if you’ve always met repayments. Taking steps to overpay and reduce the amount owed can help improve your finances and how you’re viewed by lenders
If you want to borrow more money from a mortgage lender, having unsecured debts could go against you, as it means you have more financial obligations. This may also include unused credit, such as that on credit cards.
- Close unused accounts
With many banks and building societies reserving their best offers for new customers or for a limited timeframe, it’s becoming more common to shop around. If you’ve moved your money to secure the best interest rate or take advantage of a new customer incentive, have you closed your previous account?
It’s fine to have multiple accounts. But if you have several that are unused, it’s wise to close them. It makes it far easier to keep track of where your money is and stick to a budget.
- Go through your finances and cut back where necessary
Lenders will typically look at three months of bank statements to understand what level of repayment will be affordable to you. As a result, it’s a good idea to take a look at your finances sometime before you apply and cut back where necessary.
Lenders will be looking at a range of areas, including whether you regularly use your overdraft and what your discretionary spending goes on. There are some areas that are likely to lead to more caution being taken immediately too, such as evidence of using payday lenders or gambling.
- Know what kind of mortgage you want
Before you approach a lender, you should know which type of mortgage you want. It means you’re in a better position to search the market for the deals that match your needs.
Fixed rate mortgages are often the best option for those that want security and to be certain of monthly payments for a defined period of time. Variable or tracker mortgages, on the other hand, typically offer more competitive rates to begin with and can fall too. There are other key areas to think about too. Depending on your priorities, you may want a mortgage that allows you to overpay, for example.
- Get your financial documents together
When applying for a mortgage, you’ll need to evidence the fact that you can afford to make repayments. This means having at least three months of payslips and bank statements to hand, as well as other financial and identification documents. Gathering all this together beforehand can make it easier for you to get to grips with where your assets are. It will also help to speed up the process.
- Calculate the cost of moving
While your main focus is likely to be on securing a mortgage, there are other costs to consider too. If you fail to factor these into your expenditure when moving to a new house, it could place pressure on your finances. For example, you’re likely to have to pay solicitor and conveyancing fees. If you’re purchasing a property over £125,000 and it isn’t your first home, you may also have to pay Stamp Duty.
If you’d like help throughout the mortgage application process, we can provide you with guidance. Please contact us today to talk to one of our advisers about the steps you could take to improve your finances and chances of securing a competitive mortgage.