Credit report

When you apply for a mobile phone contract, mortgage or overdraft, or a credit card; lenders normally take time to check your credit report. They will check how much credit you have so far been given and how your repayment history is like. Based on your information and other vital information that they get to ask alongside in your application, they will then be able to decide if you have the potential to repay the credit that they offer.

Your credit report, therefore, plays such a vital role in determining the type of financial products that you can access. It’s more like a financial CV that provides lenders with valuable information about your identity and whether you are a reliable borrower. Credit reports are normally compiled by commercial organizations which are also referred to us credit reference agencies.

There are likely to be about three different versions of your credit report since lenders don’t always share the same information with the major referencing agencies.

Data Found in Credit Report

Some of the information that is found in the credit report includes;

  • You address details such as; the electoral roll information with your current address. It also has some of the previous addresses that you have previously used.
  • Financial credit agreements such as; mortgages, credit cards, loans, and overdrafts. It also includes any late payments or missed payments.
  • It also has public records such as; county court judgments (CCJs), insolvencies and bankruptcies.
  • It has financial associates; this includes a person that you have taken some joint mortgage with. Lenders can also check their financial behavior when you apply for credit.

Data not Found in Credit Report

Some of the data that you’re not likely to find in your credit report include;

  • Your employment history, your criminal records, savings accounts, ethnicity, medical records, religion, or political affiliation.

The information that’s available on your credit report is normally used by lenders to help with establishing your financial behavior. They use unique criteria to review the information alongside some other information that you might have provided. Such extra information that they get to review may include; your job or salary, and other sources of income. The information that they get helps with determining whether you’re a good candidate for credit.

The reason for assessing your data is to help them establish whether you are capable of repaying whatever they lend you. It’s important to note that lenders only get to assess your credit if they have a legitimate business reason.

Another reason for assessing your credit report especially for the organizations is to ascertain your identity as that helps with the prevention of fraud. Any data that’s available on your credit report is subject to the Data Protection Act. It states that we have an obligation to ensure that the information in the report is accurate and also up-to-date. That’s an issue that many lenders take quite seriously.

Why you should check your credit report

Before you set out to apply for credit; it’s advisable that you take time and check your credit rating. This will help you identify some mistakes that you can avoid so as to increase your chances of getting the best credit deals. You will also get to identify if there exist any fraudulent credit applications that have been made to your name. Since the information help with the different agencies that may differ, you should take time and check with all the credit listing agencies.

All through your life, your credit score is likely to have a huge impact on the financial products that you take. When applying for a mortgage or a credit card, the credit score can be used to help with determining whether your application is accepted. Those who have a higher credit score are more likely to get credit easily as they are considered lower risk. It’s also important to note that each lender has a different policy for setting a credit score. If in case you fail to meet the criteria of one lender then you can as well try with another lender.

Before applying with another lender, ensure that you also ascertain why you might have been denied credit by the previous lender. Having too many credit searches within a short period of time can also have a negative impact on your possibility to get credit.

Factors that affect credit score

Your credit score is normally based on your credit report. There are a number of factors that influence the credit rating and having knowledge of them is vital. Here are some of the factors that affect credit score;

  • History of credit account payments
  • Credit searches, this normally happens when a credit application is made.
  • The public records

Simple steps to help manage credit rating

  • Review your credit report regularly to help in ensuring that the information shared is correct.
  • Ensure that you don’t miss any credit payments.
  • Close the unused credit accounts. Having a large overall credit limit can impact your ability to access credit.
  • Register on the electoral roll.

Attaining a good credit score

Having a good credit rating comes from having a history of managing your finances responsibly. It really doesn’t mean that you shouldn’t borrow; in fact, lending companies prefer a good track record of borrowing and timely repayments. To attain a good credit score you should take the following into account;

  • Ensure that you only borrow that which you can afford to repay.
  • Consider setting up direct debits. Lending companies prefer prompt payments.
  • Pay off credit if you can manage.
  • Keep your old accounts well managed.
  • Register as a voter in your current address.
  • Protect yourself and credit score by not becoming a victim of identity theft or fraud.

The following factors are considered to be bad for your credit report;

  • Avoid setting up new accounts frequently
  • Try not to maximize your credit card limit. Avoid exhausting your overdraft.
  • You should not apply too often for credit.
  • Avoid borrowing more than you can afford.
  • Try to avoid missing payments

Apart from the information that’s already available on your credit report, the lending company may also ask a number of questions as well.

 

 

 

 

 

Borrow for a mortgage

One of the common questions that many homebuyers ask when getting started with the process is the amount they can borrow for a mortgage. They seek to know how much mortgage they can afford. The answer to the question directly impacts the price range for homes that they can consider. It’s important to note the first step begins with settling on a house that you can afford.

Things to know as you borrow for a mortgage

As much as the answer isn’t set on stone, as your financial status might change, it’s important to note that the mortgage amount is considered based on your current status. Factors such as a fall in housing prices, a change in interest rates, a pay rise or promotion; all that can affect the amount of mortgage you can borrow. However, the decision is generally based on your present income status and circumstances.

Factors that influence the amount of mortgage to borrow

There are a number of factors that influence the amount of mortgage that you can borrow. Some of the factors include;

  • The amount of deposit that you have so far saved.
  • Your total earnings
  • Your expenditure
  • Some of the future changes that might affect your earning potentials such as switching jobs, having a baby, or redundancy.

Before you apply for a mortgage, there are some guidelines in place that you can follow so as to figure out the amount of mortgage that you can qualify for and even afford. That’s where the use of a mortgage calculator comes in.

Why use a mortgage calculator?

Once you input your monthly income and obligations; the mortgage calculator then calculates the maximum monthly mortgage payment that you’re likely to make. It will also work out the total mortgage amount that you can afford based on your financial details. The mortgage calculator will also make it possible to ascertain how the varied interest rates and your level of personal income can have an impact on the mortgage amount that you can afford.

Try different mortgage calculators online

There are a number of mortgage calculators that are available online and you can make use of any to get insight on the amount of mortgage you can potentially borrow. With the help of mortgage calculators, you can also work out the amount of deposit that you might need to save if you’re to qualify for the mortgage. If in case you have identified a property that you are interested in then the calculations you do will give you insight on how much mortgage you can borrow.

How Mortgage Lenders Decide on the Amount to Loan People

In the past, the majority of the lenders made a decision on the amount of mortgage to loan based on your income. The system was referred to as a loan-to-income ratio. It meant that the loan you could afford was directly in relation to your income amount. If in case you earned £45,000, it meant that you could borrow 3 – 5 times the amount. So it meant that the mortgage amount that you would borrow would be £225,000.

Mortgage Lending Cap

At present, the lenders cap the amount of mortgage that can be borrowed to four and a half times the amount of income. This is due to the fact that the rate of payment of many workers in the UK keeps changing. Borrows are expected to raise larger amounts of deposits so as to show proof that they can afford good value mortgage.

Positive Credit History When you Borrow for a Mortgage

When reviewing your mortgage application, lenders normally look for the overall positive credit history, low amount of debt, and a steady source of income alongside other factors. Lenders take time to scrutinize the borrower’s credit report when doing a review for a mortgage loan. In the process, they also review other factors such as;

Recent applications

They take a look at any of the recent applications you might have made for any other forms of debit or credit. Such applications are what contribute to hard inquiries on your report.

Payment history

Lenders also take time to review the borrower’s credit history. They go through their loans, credit cards, lines of credit, and every other thing that comes up on the credit report. This is done with the aim of ensuring that you have a track record of making timely payments which indicates that you will be responsible for your payments as a mortgage borrower.  If in case you have some late or missed payments, the lender may require an explanation on the same.

Credit utilization When you Borrow for a Mortgage

Your credit utilization ratio is another key factor that lenders consider when deciding on the amount of mortgage to loan out. The ratio shows the percentage of your available credit that you’re utilizing at any given time. If in case you’re using too much credit then it might make you appear as overleveraged and that’s considered to be risky for the lenders. The majority of the lenders prefer that the credit card utilization should be under 30% so such should be taken into consideration if a positive impact is to be realized on the credit scores.

What lenders look at when deciding on the amount to loan people

When making a decision on the amount of mortgage to loan; a lender is likely to look at the following;

  • Your salary and any additional income.
  • Any expenses such as credit card debts, child maintenance, and other bills.
  • Non-essential payments such as money spent on meals, clothing, and entertainment among others.

What Mortgage Providers Require as Proof When you Borrow for a Mortgage

You will be required to provide the lender with bank statements and payslips as proof of your income and expenses. If in case your expenses show doesn’t in any way match with your bank statements then such can delay accessibility to a mortgage. If in case you are self-employed, you should provide the following details;

  • Recent bank statements
  • Details of your business accounts
  • Details of income tax payments

How to find a mortgage where you can borrow a maximum amount

The first step towards finding a great deal begins with deciding on the type of mortgage that you want. You can decide if you want an interest-only mortgage, variable rate mortgage, or fixed-rate mortgage.  You should also find out the amount of money to save as a deposit. Factor in the amount you might need as associated fees including solicitor’s fees, stamp duty, and survey costs.

Ensure that you engage a mortgage company that’s tailored to address your needs.

remortgaging

Remortgaging is the process of getting a new mortgage on a property that you already have. There are a number of factors that can contribute to such a move. Remortgaging normally takes place when you have reached the end of your mortgage deal. However, there can also be other good reasons to switch. This expert advice guide covers all that remortgaging entails; why you might consider it when to consider remortgaging, the costs of remortgaging, and step by step approach on how to do it.

What does Remortgage Mean?

When you opt to switch from one mortgage lender to another on a home you already own, the process is referred to as remortgaging. This might mean making a new deal with your present lender or you might opt to move to a new mortgage lender. Your mortgage is likely to be the biggest financial commitment that you decide upon. Remortgaging is equally an important decision and should be undertaken with utmost seriousness just like the first mortgage.

There are a number of remortgaging options that one can choose from and here are some of the key things the process entails;

Why Consider Remortgaging

There are a number of reasons why you should consider remortgaging and having knowledge of them can be of great help. Here are some of the reasons for remortgaging;

Your current term of the mortgage is coming to an end

When the mortgage term is coming to an end, you need to put on the lender’s standard variable rate (SVR) which you may want to at all cost avoid. This is because the interest rate you are likely to pay might be higher.

You intend to increase borrowing so as to free up your cash for some major expense

You may consider remortgaging if you have some major expenses that you want to free cash for. It can either be a home improvement project that you might want to fund, a buy-to-let property that you might want to invest in or other major expenses.

Reduce monthly repayments

You might be on the lookout for a cheaper mortgaging deal that you might find to be affordable each month. You really don’t have to borrow more so as to switch into a better deal with better repayment rates. Remember there might also be fees associated with exiting the present deal but remortgaging could still be worth it.

You intend to overpay then consider remortgaging

Once your financial circumstances might have changed, you might prefer working with a mortgaging company that allows you to overpay. By overpaying your mortgage installments, you also get to reduce the length of time you’re required to make payment in the process which is great.

Change in the base rate for the bank of England

If in case you are on a variable rate mortgage, then you might consider shopping around for a rate that’s more competitive.

Your property has increased in value

When your property has increased in value it means a lower loan to value (LTV). It might therefore mean that you qualify for a cheaper mortgage.

Fix your payments when considering remortgaging

You may consider remortgaging if you intend to fix your payments. If you know that your payments are going to increase then you can opt for remortgaging to a fixed-rate deal. A fixed-rate deal will provide you with that certainty on the amount to pay each month.

When to remortgage

Remortgaging is something that you can consider every few years. It helps in ensuring that you are on the best deal and that you are not paying higher amounts. Ensure that you set a reminder three months prior to the end of the fixed deal. Doing such will provide you with plenty of time. You can use to shop around and have your remortgage application completed in time before switching to a better deal.

If in case you have repaid a good amount of your mortgage in the past years and have gained some equity on your home, switching to a different mortgage can help reduce the interest that you get to pay each month. You will then be able to take advantage of some of the most competitive deals.  According to the lending trends in the UK with regard to mortgage finances, there were 21,370 new mortgages in May 2019. This was alongside additional borrowing where the homeowner borrows more than the original mortgage amount was at 20% compared to the same month previous year.

Please note that if you choose to switch before your current mortgage deal comes to an end, you may incur some penalties. Ensure that you do your math well for it might even be cheaper having to pay the penalties then switching.

The remortgaging process

Now that you are aware of when and why remortgage, let’s also have a look at how to remortgage.

Get into paperwork

Take time and remind yourself of the current of the mortgage deal. Get to know the type of mortgage that you are on, what the current interest rate is, and the length of time left to repay the mortgage.

Consult a free-mortgage broker

A mortgage broker will help you with workings on whether remortgaging is capable of saving you money. A broker will also help you compare a number of lenders that you can compare so as to land the best deal. They will also include fees and penalties for the calculations.

Check with your lender for remortgaging

Allow your current lender the opportunity of matching the deal that your mortgage broker recommends for you. That is if they are capable of offering something similar.

Prepare your mortgage application

Let your mortgage broker use the information that you have already provided to populate the lender’s application form. It then makes the whole application process easier for you and you can do it online. Remember that you can also track your application online.

Engage a conveyancing solicitor

If in case you remortgage with the current lender then it might be described as product transfer. Therefore, no additional legal work may be required in the process. However, when remortgaging from a new lender, you will need to engage a solicitor.

Take the hassle out of your remortgaging by engaging www.gaucimagri.com

mortgage

A mortgage is a loan that’s secured for the sake of purchasing a property. It can be a home, real estate property, and such like.  The borrower gets from the lender the funds required to purchase the property. In return, the lender gets a promise from the borrower to repay the loan with some added interest. The mortgage document legally secures the contract and provides the lender with a legal claim against the borrower’s property in case they default on repayment terms.

The UK has different types of mortgage programs that are available for the borrowers. Taking a mortgage is a substantial financial requirement and having an understanding of the different types of mortgage programs can be of help.

Types of Mortgage

There are two types of mortgage that one can opt for; the difference lies in the rate of interest to be charged. These are; a variable rate mortgage and a fixed-rate mortgage.

Fixed-Rate Mortgages

A fixed-rate mortgage has a fixed interest rate. It means that the rate of interest will stay the same each month until the expiry date of the initial deal. This is an ideal option for those operating on a tight budget. The borrower is able to know in advance what they should be paying at the end of each month. A key advantage with fixed-rate mortgage is the fact that the monthly repayment doesn’t change even if the lender’s interest rates change.

It, therefore, becomes easier for the borrower to budget their finances. The borrower then has some certainty with the outstanding expenses. The major disadvantage with fixed-rate mortgages is when the lender’s interest rates fall, the borrower will then not be able to benefit from the reduced interest rates. Since the mortgage interest rates are fixed, longer deals are likely to have higher annual percentage rates than the shorter deals.

It makes it possible for the lenders to compensate for the money that they might have lost on monthly repayments in case of a rise in interest. Fixed-rate mortgage deals are also likely to include interest in overpaying or ending the agreement early.

Variable Rate Mortgages

Variable-rate mortgages are those with a fluctuating interest rate over the loan period. It means that the number of monthly repayments can change depending on the interest rates. The borrower should therefore be well prepared to handle the possibility of monthly rates increasing if there is an increase in the interest rates. Borrowers may also consider the possibility of the repayments coming down if there is a decrease in the interest rates. There are different types of variable-rate mortgages that one can consider;

Standard variable rate mortgages

This is the standard interest rate that’s set by lenders. It’s normally linked to the Bank of England’s base rate. Whenever the base rate goes, there is likely to be an increase in the mortgage rates and the monthly repayment rates. Since the standard interest is set by the lender, he can opt to either increase or decrease it during the period of the mortgage. SVR mortgages can be risky for the borrower especially if they are not able to afford the unexpected rise in the monthly repayments.

This type of mortgage should only be considered only by those who are financially secure and capable of coping with the fluctuations in the interest rates. The advantage with standard variable rate mortgages lies in the fact that the borrower is free to overpay or even leave the agreement without incurring any penalty.

Discount Rate Mortgage

This is where the lenders can offer a discount off the standard variable rate for a given period of time which can either be two to three years. The lower interest rates, therefore, mean that the monthly repayments can be worked out cheaper. However, when the period for discount rates come to an end, the rate of interest returns back to the standard variable rates as provided by the lender. The monthly repayment rates are also likely to increase in the process.

Since SVR rates differ between lenders, having a larger discount may not necessarily translate to cheaper monthly installments. For example, having a 2% discount on a 6% SVR will have a higher interest rate of 4%. Compare it to a smaller discount of 1.5% on 5% SVR; the interest rate payable is 3.5%. In discount rate mortgages, penalties might also be charged for ending the agreement early or overpaying.

Capped Rate Mortgage

In capped rate mortgages, the interest rate moves in line with the lenders SVR. This helps with establishing a measure of certainty that the repayment amounts will not go beyond the specified amount. However, it’s important to note that the capped rate of mortgages is higher than the SVR mortgages. This is because the borrower gets to pay for the added security.

 Tracker Mortgage

A tracker mortgage is normally linked to another interest rate. It keeps moving up and down in line with the rate being tracked. For example, if the base rate that’s being tracked increases by 1%, your interest rate will also increase by 1%.

The tracked rate is normally the base rate that’s determined by the Bank of England. The tracker mortgage may last for a period of two to five years. However, there are lenders that might provide a rate that lasts for the entire period of the mortgage. One advantage of this type of mortgage is the fact that its fluctuation is normally determined by the rate it’s linked to instead of the lender.

Tracker mortgages may also attract early repayment charges, and that should be considered before opting to switch before the mortgage period ends. Tracker rate mortgages are also cheaper when compared to fixed-rate mortgages. Ensure that you take time to shop around so as to identify some of the cheaper rates available.

Interest Only Mortgage

Interest-only mortgages enable the borrower to pay off mortgage interest without paying for the capital. The monthly repayments may seem cheaper; however, the capital may still have to be paid at the end of the mortgage period.

 

 

Bridging financing

Bridging financing has become one of the alternative ways of getting finance. However, it’s advisable that one gets to understand what it actually entails. Raising finance for your property investment is an area that’s changing constantly. For instance, every lender almost has its own unique set of requirements that borrowers should meet.

A key thing about being in the property market is the fact that there are many ways of raising finance.  It’s possible to come across an ideal refurb opportunity but fail to get the standard buy-to-let lending. That might be because too much work is required in the process to secure finance.  When such happens. it is the perfect time to think about bridging financing.

Raising Finance Fast through Bridging Financing

Securing finance can be such a huge barrier to property investors and more so with the prevailing economic climate. Buy-refurbish-refinance is such a fantastic idea and a very popular investment strategy. However, there are instances where one finds discounted properties that can be quite expensive to refurbish especially if you don’t have the needed money ready. One might prefer entering into a joint venture which is a common practice within the industry. Although, the alternative way of financing such is with the help of bridging finance.

Bridging Financing

These are loans that are useful for those in need of faster access to a secured short-term loan. The loan may be taken to help with refurbishing a property quickly. Bridging finance can be such an advanced strategy and it requires one to be well conversant with what they are actually trying to do. Bridging finance can also be quite expensive. For example, if in case you are lining up a purchase now that you expect to complete within a couple of weeks and you have opted for bridging as a way of financing it; there will be hefty fees payable to the lender for the setup process.

When to consider bridging financing

Bridging should be considered if you are purchasing a low-value property. A lot of work goes into engaging lenders. You may also fail to find many buy-to-let lenders that are willing to fund it. Bridging financing then becomes the best financing alternative to consider. If you have the cash needed to purchase and refurbish the property then you can consider that. However, you may also want your cash to be free so as to use it on other deals and also as a way of protecting your cash flow. In such a case, bridging becomes the only option as much as it can be expensive.

For example, a loan amount of £50,000 can attract a fee amount of £2,000. On top of that, you are also likely to pay an interest amount of 1.5% per month. You can contrast that charge with a 2.25% for a typical buy-to-let loan. It can be worth it for the borrower. This is due to the fact that the property to be bought is cheap and after refurbishing it, the value of the property will likely increase. Within a period of six months, you can then choose to go to a conventional buy-to-let lender who may grant you buy-to-let mortgage, and that provides you with the opportunity to switch out of the bridging loan.

Short term nature of bridging financing

So the bridging loan may just be used for short-term and you may not end up being stuck with it forever. Bridging loans may go for three months with some lasting for six months. There are also those that might extend to 12 months and beyond but you will likely pay high fees for such.

The challenge arises in this scenario if you have six months bridging loan and you opt to extend the loan beyond that period; many bridging lenders will charge you fees and it can be quite expensive. If in case you’re paying 1.5% a month, it might even go to 2.5% or more as a penalty if in case you miss repayment at the expiry of the loan period.

It’s advisable that you have a clear plan with your broker so that you can easily switch from bridging loans once the time comes. With prior arrangements with your broker, you can easily go off bridging to a conventional buy-to-let loan. However, in the short term; opting to use a more expensive bridging option makes it possible for you to access deals that many buyers might not touch. Bridging makes it possible for you to enter a deal that might have not been possible and other circumstances.

Here are some of the factors that make bridging financing the best option for more deals;

Bridging loans are quick

Property bridging loans provide a way of getting quick access to capital. Once you land a perfect property deal for your portfolio, there is likely to only be available a small window of opportunity for the sale to be completed. This comes handy when the property you have identified is on market for a good price and it’s something you don’t want to miss.

A bridging loan is considered a short-term financial solution. It, therefore, gives one access to the needed funds quicker than when borrowing from other forms. In this way, you can get the funds needed within the set deadline and be able to secure the property. There are instances where you can even raise 100% of the purchase price through a property bridging loan.

Bridging finance is flexible

When compared to the traditional mortgages and high street lending; bridging finance is considered to be far much more flexible. Mainstream lenders normally require a lot of information from you before granting the needed finance. They will require information about your credit history, income, and others before they agree to a loan. If you fail to meet the set criteria then there are high chances of not getting finance from them.

Bridging finance lenders will, however. Need information about the property since it’s the property that’s used as security for the loan. The sale of the property is then your exit strategy for the repayment of the loan. With bridging financing, the repayment terms can be amended to suit the borrower. The loan should however be repaid within the set short period of time.

If you’re looking for financing that will get you more deals then it’s advisable that you consider going for a bridging loan.