If you’re thinking about taking advantage of the stagnant property market and are fortunate enough to be in the position to buy, then read on.
This guide will prepare you for what lenders expect from applicants in 2021, and everything else you need to know if you’re looking to secure a £360,000 mortgage deal at the most favourable rates.
How do lenders determine eligibility?
There’s no black and white answer to this question, because all lenders work to different eligibility criteria. However, there are several significant factors all mortgage providers take into consideration when assessing an application:
How much weight each factor carries is lender-dependent, which is why some may be happy to consider lending to you and others will decline. To avoid a rejection, your best starting point is to have a chat with a broker.
They’ll ask you some questions about your situation and point you in the direction of those most likely to accept your application. Our team has extensive market knowledge and access to over 100 UK banks and specialist lenders, so we’re confident we’ll be able to secure you a competitive deal.
How do lenders calculate my affordability and what is acceptable?
When you apply for a mortgage, lenders will want to know how much you earn and what sort of job you have. Most work to income multiples, with the standard cap being at around 4 - 4.5x your annual income.
But while income is a factor, lenders also want the reassurance that your earnings are sufficient to cover your repayments alongside your other fixed monthly outgoings, such as loans, credit cards, car finance and even your general spending habits.
They do this by working out your ‘affordability’. This is calculated by dividing the sum of your fixed outgoings by your monthly income and multiplying by 100, and is written as a percentage.
If you have a ‘healthy’ affordability of 35% or below, lenders are likely to look at you more favourably - although they will often stress Test how the addition of a mortgage will affect this figure.
Is it more difficult to get a mortgage if I’m self-employed?
While it’s true that some lenders are more wary about lending to the self-employed, there are plenty of providers with more flexible criteria if you know where to look - some even specialise in self-employed mortgages.
Even if your income fluctuates, as long as your affordability is consistently sufficient there’s no reason you shouldn’t be considered. If you work for yourself, ensure to prepare your tax records ahead of making a mortgage application. Most providers will request the following:
Two or three years’ certified accounts.
An HMRC tax year overview for the previous two to three years.
Don’t be disheartened if you’ve previously been declined a mortgage due to being self-employed. Our team’s extensive, up-to-date knowledge of the landscape means we can point you in the direction of lenders most likely to accept you, whatever your situation.
How much deposit do I need for a £360,000 mortgage?
Finding a lender who is willing to offer 5 and 10% deposit mortgages is increasingly difficult in the current market - also you may be eligible for the latest Help to Buy scheme if you’re a first-time buyer.
The current deposit requirements for residential mortgages tend to be around 15 - 20% of the property’s value, although this will vary by lender and your other circumstances. For example, if you have excellent affordability lenders may be willing to accept a lower deposit.
Similarly, if you have a history of adverse or low affordability, deposit requirements may be higher. It really all is case-dependent, so be sure to enlist the help of a broker who can talk you through your options.
Some mortgage products, such as buy-to-let mortgages and commercial loans, are deemed higher risk investments for lenders as they rely on rental income to cover the mortgage repayments, and as such deposit requirements are higher still - usually between 25 - 40%.
Can I get a mortgage of £360k if I have bad credit history?
Many people think that bad credit history means they have no chance of being accepted for a mortgage, but that’s not always the case. While it’s true that some refuse to accept anyone with marks on their credit history, others are more lenient. There are even specialist bad credit mortgage providers out there.
Those who have suffered one of the more severe credit issues such as CCJs, IVAs or repossessions may find it difficult finding a lender (though that’s not to say it’s impossible), whereas the occasional late payment may be considered.
As well as the severity, how long ago the incident occurred is an influencing factor. For example, if the instance happened a few years ago and / or you have evidence to prove that your circumstances are vastly different now, lenders may be more lenient.
If you have a history of adverse, it’s strongly recommended that you seek advice from an experienced broker who can check your eligibility before you apply. Rejected mortgage applications can further negatively impact your credit score - something you definitely want to avoid.
What other factors impact my mortgage eligibility?
As we’ve ascertained all providers have different requirements, and when they receive an application they will assess you against their lending criteria. Other factors that can be the make or break include:
Length of time in your job - if you’ve been working for the same company for a number of years you may be considered a lower risk than someone who is constantly changing jobs.
How old you are - some lenders cap how much you can borrow or offer shorter mortgage term lengths to those aged 55+ and/or approaching retirement, as they pose a greater risk as borrowers.
The type of property you want to buy - some lenders are unwilling to invest if you’re looking to buy a ‘non-standard construction’ property (i.e. those not brick-walled and tile-roofed).
Get in touch for advice
If you’re looking to bag a £360k mortgage in the near future, your best chance of securing a fast, competitive deal is to get in touch with one of our brokers. Submit an online enquiry via our contact form or give us a call on 02380 980304.
Even if you’ve been declined a mortgage in the past, there may still be options out there for you - and our team of experts are best placed to seek them out. They can also check your eligibility on your behalf before you apply, saving you time and helping avoid rejections.