Taking out a mortgage continues to become more and more difficult with the responsible lending initiatives becoming even more strict and prevalent in the UK.
Over recent years, pressure on lending institutions to lend responsibly has forced them to tighten criteria and revise affordability calculations. In April 2014, the Mortgage Market Review took place and was designed by the FCA [Financial Conduct Authority] to protect consumers and prevent excessive or risky lending by mortgage providers. However, lenders and brokers have said that these changes have extended the mortgage writing process and reduced the amount borrowers can raise.
The affordability checks have become overbearing with lenders looking to establish far more about a borrowers circumstances including full income and expenditure analysis [costs of travelling to work, childcare, other household bills including energy costs, and details of any loans and credit cards that will continue after the mortgage is taken out] rather than the old income multipliers ie typically 3 / 4 x gross income. This new method of calculating an applicants maximum loan is likely to mean that some borrowers find they can borrow less than they might have expected in the past.
Borrowers who have not applied for mortgage finance since around the peak of the property market in 2007 are likely to be shocked by the radical changes in the process. Lenders require a lot more paperwork to underwrite applicants risk and there is a lot more scrutiny of documents such as bank statements and anything else that might need to be substantiated. This is supposed to go towards making a better, considered lending decision.
Another change dictated by the new affordability guidelines is known as “stress testing”. This means that the lenders will analyse how new borrowers would cope with a rise in interest rates. The reason for this is simple, the Bank of England base rate is likely to increase in the next few years. The lender will now seek to calculate if you can afford the mortgage at the current interest rate & at a higher interest rate. This could quite feasibly result in an applicants mortgage proposal being declined.
When considering selling your property, it is becoming more and more important to consider the implications of your buying applying for finance to fund the purchase. The greater the deposit your buyer has available, the lower the risk the applicant offers the mortgage lender and so the more likely he / she is to be accepted. If you are dealing with an Estate Agent, ask questions about your buyer, establish what they do for a living, their age, the amount of deposit they have to put down. After all, selling your property is widely considered one of the most stressful events in your life. You want to be as confident as possible that your buyer is committed to the purchase and will not pull out or try and reduce the price a few weeks / months into the process.
There is an alternative solution for vendors, with more and more using this alternative with a view to achieving a hassle free, quick sale. This alternative involves dealing with one of the specialist corporate cash buyers, one of which being UK Homebuyers Ltd. There are many benefits to motivated sellers of dealing with a company like UK Homebuyers, some of which are highlighted below;
- Cash buyers offer typically around 80-85% of market value ie c£80,000 – £85,000 for a property worth £100,000
- Some cash buyers will charge fees up front for surveys etc, with UK Homebuyers and a few others, there are no up front fees whatsoever!
- Some cash buyers, UK Homebuyers included, will pay all the legal costs
- Very quick turn around to legal completion, typically 7-28 days!
- Cash buyers like UK Homebuyers will buy any property, regardless of location and condition
- With companies like UK Homebuyers you will not have to entertain regular viewing, there are no estate agents involved, no auctioneers to deal with, no fees, no lengthy delays generally meaning, less stress and hassle for the vendor.