Frequently Asked Questions

What is the most I can borrow?

This will usually depend on two factors.

Firstly, your annual earnings total. Mortgage lenders have different policies but they usually apply a multiple on your annual income of between 3 and 4 times. If it is a joint application they look at the combined annual earnings and apply a multiple typically around 3.5 times.

Other lenders use more advanced credit models that take into account your expenditure as well as your earnings. You may have to fill in a detailed questionnaire that details your outgoings. Obviously if you have 5 children you are likely to have less disposable income than someone earning the same with no dependents.

They are essentially checking out the affordability of the loan, something you should have already considered when making the application.

Talk to one of our specialist advisors and they can do a thorough assessment of your affordability and have an extensive knowledge of Lenders’ criteria. Save yourself time and effort by letting our advisors do all the hard work for you.

Secondly, the value of the property.

Many mortgage lenders will grant a mortgage of up to 85% of the value (as assessed by the lender's own valuers) of the property. This loan-to-value ratio can go up to 95%. However the number of lenders who will do this is currently limited.

If the lender's valuers think that the property is overpriced, they may either refuse the loan, reduce the amount they are prepared to lend or they may offer a mortgage at a higher interest rate.

What term are mortgages usually for?

Many people assume that the normal length of a mortgage is 25 years. Although this is the traditional length, mortgages can be granted for other terms, i.e. 15, 20 or 30 years. Obviously the attraction is the shorter the term, the less interest will need to be paid. We will tailor the term to suit your individual needs, budget and circumstances.

What is a mortgage decision in principle?

Based on the initial information requested by the mortgage lender, they may well say 'yes, in principle we will grant you a mortgage', i.e. it is a conditional loan offer. This will usually be based on a provisional credit check and declaration of your income.

You can then confidently look at prospective properties and go as far as making an offer, knowing that you have a high chance of obtaining the mortgage necessary for purchase. Of course once you get to that stage the lender will want to see documentary proof of your initial statements i.e. relating to your income etc.

So it is as it states, a 'mortgage in principle'. Armed with this, estate agents and vendors will have more faith in you and you shouldn't be perceived as a timewaster. You may well be dealt with more favourably than any others competing to buy your chosen property who do not have finance in place.

How do I prove my earnings?

If you are in employment, you will be asked for written proof of your pay for the last 12 to 24 months. Typically, this will be your payslips and P60. Your employers may also be contacted for verification.

If you work for yourself or are a company director the market is a lot easier now there are specialised mortgage products for this area offered by most major mortgage lenders. They normally ask to see your accounts for the last 3 years (preferably audited).

Failing that, a letter from your accountant confirming your income will usually suffice where your business has not been running for a long period.

Self-certified mortgages are now also available where you may have difficulty in proving your income but you are able to provide evidence that you can afford the mortgage repayments. You will be required by the lender to self-declare your income and to prove your ability to service the loan.

these types of products may not offer the most competitive rates

What happens if I am not truthful in my application?

Usually any lies will be found out by the lender. They have ways of cross-checking information. Lies about things like credit history are very easy to verify. Your application will be refused. Worse, your prospects of getting another mortgage in the future from that lender or other lenders (they share information in these cases) will be massively reduced. Best to be honest from the start.

I have bad credit. Will I be able to get a mortgage?

Obviously it is not going to be as straightforward as for someone with a sparkling credit history, but it is not at all impossible. A number of adults in the UK have had bad credit at some point and have fallen behind with their mortgage payments. These days some lenders may still consider offering a mortgage to these people.

If you have a CCJ (County Court Judgment) recorded against you it might mean that it is difficult to get a mortgage from the bigger High Street lenders. However there are specialist mortgage companies who are happy to provide people with adverse credit problems such as CCJs with mortgage opportunities.

Interest rates on these products are likely to be higher and it’s important that you regularly review your credit rating to ensure you are on the best possible deal for your circumstances. By talking to one of our advisors you can save yourself the time and effort of having to search for lenders by letting us do all the hard work for you.

I would like to know what a redemption penalty is

A redemption penalty is now more commonly known as an Early Repayment Charge. Some lenders promote mortgage products that have a low introductory rate for a fixed period of time, often two or three years. After this period the rate reverts back to the Lenders Standard Variable Rate.

Obviously they don't really want you to leave them and defect to another lender before they have had a chance to earn much out of your business.

Most lenders will insert an Early Repayment Charge. Always make sure you ask the lender about redemption penalties and double-check your contract before you sign, as sometimes they hide it deep in the small print. This is where Select Mortgage Solutions can help. We can review all the paperwork with you to ensure you are completely happy before you commit to the mortgage.