How Much Can I Borrow for a Mortgage in Derby?

How Much Can I Borrow For A Mortgage | MoneymanTV

Here at Derbymoneyman, we find the two questions First Time Buyers and Home Movers in Derby commonly ask us is ‘Can I get a mortgage in my circumstance?’ and ‘How much can I borrow?’. In this article, we will be discussing the second question as this has changed drastically in the past decade.

Historic rules for borrowing for a mortgage in Derby

Prior to the days of credit scoring, your local Building Society Manager would manually assess mortgages. To make the process more consistent and reliable, the 1990s introduced the idea of lenders carrying out more regular income assessments.

In order to lower the number of mortgages being accepted to people who couldn’t afford one, a lending cap was introduced. This prevented people from borrowing more than three to four times their annual income.

To receive more applications, lenders started to become more generous with this leading cap as well as their conditions. There were even some lenders who accepted customers a mortgage without any background checks such as payslips. This would eventually become the catalyst for the credit crunch in 2007. In the midst of the credit crunch, lenders were requesting a 20-30% deposit, which made it very difficult to obtain a mortgage as a first time buyer in Derby or if you were moving home in Derby.

Mid 2000s approach

In the early 2000s, lenders became flexible in their criteria a lot more, arguably being too generous in the amount they would be willing to lend their customers.

Depending on the lender, some people were offered self-certified mortgages. These type of mortgages meant you were not required to have a background check so as the customer, you could self certify your income, regardless if the buyer falsely inflated the amount they were declaring.

Due to many people carrying out self certified mortgages, the market fell. This began the infamous Credit Crunch of 2008, from then to 2010, these became a very difficult times.

This especially effected individuals who were wanting to take their first step onto the property ladder. At that time, stricter lending criteria was to be put in place due to lenders having to change.

Mortgage Market Review 2014

As the market made a recovery, the Mortgage Market Review (MMR) 2014 was created to provide an updated and sounder credit scoring system. The MMR was a set of requirements that lenders had to follow. Nowadays, lenders can determine if an applicant will be able to pay off their mortgage based on their financial state through the affordability calculator.

Lenders can use the calculator to receive a more meticulous insight into an applicant’s spending habits as well as net disposable income. A thorough assessment of your bank statement is carried out to ensure that if you can’t afford a mortgage, then you are not granted one as you could have been prior.

Deeper analysis

With this assessment, you will find that the majority of lenders will no longer go past 4.75 times your annual income.

As mentioned, lenders will look into your spending habits and the way they analyse these depends on your situation. For example, you may have to pay high childcare costs, have a large number of credit commitments and in some circumstances, you might be paying off your student loan. With this in mind, a mortgage lender will likely offer you less than your work colleague for example, who has fewer outgoings.

These days, there is a distinctive difference between lenders when it comes to how much or little they will lend to some customers. Now and again, lenders have been known to penalise low-earners. 

The reason for this might be that they are looking for that type of applicant. They may lend if they see pension contributions as a fixed outgoing, in particular, to customers who have a significant deduction, less than a private-sector worker.

With every lender comes a very unique lending criteria, and every customer has its own circumstance, in the case that you need to maximise your borrowing capacity to have a chance at buying your dream home.

Lender Variances

Lenders will always be competitive when it comes to price and lending criteria, however, they will avoid competing for the lowest rate as this will provide no profit gain for them. Furthermore, this will be highlighted through the difference between lenders and their maximum borrowing capacity. Different lenders target for different niches of clients therefore don’t feel it’s inevitable that one lender won’t lender to you as there will be another out there who would.

State benefits like tax credits are factors lenders will take into account for a mortgage. Some lenders may be more generous if you are for a self-employed mortgage in Derby. Increasing the amount they will lend can be done through extending the term of the mortgage to the maximum allowable.

How can a Mortgage Advisor in Derby help?

Seeking Mortgage Advice in Derby can be very beneficial. On behalf of the customer, our team will search the market to try and match you to various lenders criteria.

When it comes to knowing the maximum amount you can borrow for a mortgage and your repayments, book your free mortgage appointment online today to speak with one of our expert Mortgage Advisors in Derby. They are determined to make sure your process run as smoothly as possible and search through thousands of mortgage deals to find you the most suitable for your circumstances.

Problems & Hurdles Obtaining a Mortgage in Derby

Specialist Mortgage Advice in Derby

As a mortgage broker in Derby, we find that some customers are faced with hurdles that regularly crop up. Furthermore, it’s rare there is a situation our expert mortgage advisors haven’t been faced with before. Therefore, we are here to help with any situation with our Specialist Mortgage Advice in Derby. Below are some factors you may come across when getting a mortgage:

Child Care Costs

Getting turned down for a mortgage due to childcare rarely happens. The only impact it may have is that you might get granted a lower mortgage amount compared to an applicant with the same income but no children. They still get taken into account as childcare costs are assessed as a loan or credit commitment. Additional expenses that children bring are automatically taken into account with the lender’s affordability calculators.

You may find a number of lenders will factor in state benefits including child benefit, however, this may impact the maximum mortgage allowable further.

Mortgages following Divorce/Separation

You don’t buy a home with your partner with the expectation of divorce or separation. Unfortunately, this can be common and when it does, you need to alter the family finances.

The most common question we get asked include:

  1. How do I remove my ex’s name from my mortgage?
  2. Can I remove my name from my ex’s mortgage?
  3. Am I allowed to have a second mortgage?

The answer to all of the above can be yes, however, you will need expert mortgage advice. In the case where you do end up receiving maintenance, this can be included as part of the assessable income for a mortgage.

Starting a New Job – Can I get a Mortgage?

We find this question crops up a lot, it is usually straightforward. In some cases, you will need to have been working consistently for a certain period, however, this all depends on the lender’s criteria. Even if you are in your first job, you can get a mortgage. If you are starting a new career soon, as long as you have a signed contract and job offer letter, you may be able to get a mortgage.

A factor that can be a problem with some lenders is gaps in employment. Usually, probationary periods are acceptable in any case.

Evidencing Your Deposit

These days, Anti-Money Laundering precautions are fairly stringent. To abide by these precautions, all lenders will need you to not only evidence your deposit but, where the money originated. As well as the lender, your solicitor and the estate agent you are buying from may ask you for this too.

Cash is not acceptable. The bank will question any significant cash deposit, which could lead to a rejection of your application.

All of your deposit coming from a gift can be a regular occurrence and is possible. There needs to be written evidence from the person gifting you the money that it is a gift, not a loan.

Difficulties Getting a Mortgage in Derby

Specialist Mortgage Advice in Derby

Through our experience as a mortgage broker in Derby, we have found that there are a lot of questions within the mortgage industry that come up regularly. To relieve clients worries, below is a list of common difficulties you may get into:

Childcare costs

If childcare costs are involved, you usually aren’t as at risk of getting turned down for a mortgage. Potential outgoings of childcare costs can sometimes affect affordability. This is something you should consider as the lender may grant you a lower mortgage amount because of your childcare, in comparison to an applicant who may have the same amount of income but have no children. 

Childcare costs are usually associated with a loan or credit commitment. Parents can still be granted a lower mortgage without the childcare costs and the mortgage amount may still be lower than applicants who aren’t parents. This is because lender’s affordability calculators often factor in having kids in as some additional expense. 

Child benefits and other state benefits can be something lenders will consider. In some cases, increase the amount they will be willing to lend you.

Mortgage following Divorce/Separation

Nobody ever plans ahead in buying jointly with a partner, expecting to eventually get a divorce or to separate. Unfortunately, this happens more often than you might think. When divorce or separation occurs, certain files and documents need to go through changes such as a name change on a mortgage and inquiring as to whether or not a person is allowed two mortgages.

It’s a requirement that you get in-depth mortgage advice in Derby for instances like names to be removed and for someone to be allowed two mortgages. In the circumstance where you receive maintenance, this usually is put towards your income for a mortgage.

Starting a new job – Can I get a Mortgage?

Surprisingly, this is a lot easier than people might think. In some cases, the lender’s criteria may require the applicant to be in work continuously for a period of time while some lenders are flexible with this. Even if you are still in your first job, and haven’t been employed with anyone else, you may still be able to get a mortgage.

Obtaining a signed contract and job offer when you’re starting a new job can give enable you to get a mortgage. Gaps in employment might be a problem with lenders, which is something to remember and probationary periods are typically acceptable.

Proving your deposit

The years after the financial crash have seen Anti-Money Laundering precautions become stricter. Lenders will want you to evidence where your money for the deposit has come from. This is something solicitors and estate agents might want to discuss with you.

Due to this, any large amounts that you want to deposit will be questioned and could mean your application will be at risk of being rejected. This can be a common occurrence for first time buyers in Derby.

It’s common for some applicants to have a ‘gifted deposit’. In this case, the person who decides to gift your deposit will need to confirm in writing that it is not a loan and is just a gift. 

Open and Honest Mortgage Advisors in Derby

The Importance of Changing Your Address Ahead of a Mortgage

Getting Ready For a Mortgage in Derby

It’s important to remember that you need to be careful with your credit score when it comes to applying for a mortgage. This is because you’re more likely to be accepted for a mortgage if your credit score is higher. Addresses can be one of the factors that can affect your credit score. Having fewer addresses on your record is best, however, people have been taking this in the wrong direction. 

In some cases, where applicants have moved out of their parents’ address into rented accommodation, they have left the address they previously lived in on their bank statements, credit card, and electoral roll information. 

The reason many do this is that they believe that it could help their credit, but this is simply not true. If anything it can make it worse, because even if you don’t think it will show up, if you have moved to a new address, it will be recorded somewhere on your credit report.

This could be from when you have ordered online and your delivery address is shown, or can be from a car/home insurance search. Basically, the address will link to your credit report from anything you have done involving a payment.

Check Before You Apply For a Mortgage in Derby

Before carrying out a credit search and applying for a mortgage, it’s good to check that nothing will go against you. The things that will need to be switched to your new residential address includes both credit cards and current accounts as well as the electoral roll. 

These checks only apply in situations where you have already moved out of your parents or previous home, as usually you only change your address after you’ve moved in, not before. If you are in a situation where you have already moved in and are paying off a mortgage, it’s imperative that you update your address to reduce any harm in the future if you are looking to remortgage.

Updating your address on your credit file and the electoral roll is something that people forget to do, however, it can make a huge difference too. As well as this, being accurate on the date in which you moved into your rented apartment/new home and the day you left is important because, making a mistake with these dates can sometimes make it look like you’re living in two places at once. 

Impress The Mortgage Lender

You need to demonstrate that you are responsible and take your financial life seriously. Therefore, you need to make sure that every bit of information on your file is up to date to show the lender that you are fully prepared. Impressing your lender is something you want to do ahead of applying for a mortgage and, by doing this, you conduct yourself in a more open and honest way.

Get in Touch for Mortgage Advice in Derby

Having no mortgage experience as a first time buyer in Derby can be difficult, this is why we are here to offer you a helping hand. Get in touch if you still need some mortgage advice in Derby or you are looking for some insight from a professional mortgage advisor and we’ll see how we can help.

Remortgage For A Home Office | Mortgage Advice In Derby

Remortgaging your home in Derby

Thanks in part to COVID 19, there are a lot of people who are now working from home. It has become a way of working that some people prefer and is something that many people are sticking with permanently.

Technology has allowed people to easily communicate to their colleagues from their homes through video calls and allowed people to have access to everything they need. Having access to a computer, at least, can allow you to be flexible with your work environments like home or office, regardless of what job you have.

How to remortgage for a home office in Derby

If you are looking to renovate your property for a home office, and need to raise additional funds to carry out the work, our mortgage advisors in Derby can help look at your capital raising remortgage options. In many cases, we find people remodel their spare room or a garage as their chosen office space.

Finding a suitable remortgage deal is the next thing to do. This could be done either on your own or with the support of a mortgage broker in Derby. It’s entirely up to you. Another option is to go to the bank directly, but they will only provide deals that are offered in-house.

There are thousands of deals out there so, shopping around can be a good option and this is something you can do with the assistance of a mortgage advisor. You will probably find that the deals the bank offers aren’t as good compared to the ones you may find when you shop around. 

Getting a helping hand from one of our knowledgeable mortgage advisors in Derby can be beneficial. We can search through thousands of remortgage deals for you to find the one tailored to your circumstance and future plans.

The costs of a home office in Derby

To kick off the process, start with estimating how much you think the costs for the works are going to be. The costs might range between £5,000 to £15,000. The room size and the amount of work that is needed to transform the room into a fully-fledged office will be factored in the amount you might have to pay.

Remortgaging seems to be in its prime time due to the interest rates being the lowest we have seen in a while. For example, if you manage to get a 2% interest rate on a typical 25-year mortgage term, to borrow an additional £5,000 you may only pay back £21 per month and £65 a month might allow you to borrow an additional £15,000.

The change in working from home could potentially save you money in travel every week. It will also have a big benefit on the environment by reducing your carbon footprint and will allow you to work flexibly around daily errands such as the school run.

Are you looking to remortgage for home improvements?

Get in touch with a knowledgeable remortgage advisor in Derby if you are looking at converting a spare room or garage into an office. We have a great deal of experience in finding the best mortgage that is tailored to our customer’s needs. Our team knows how to find you that 1/1000 deal!

Here at Derbymoneyman, we offer a free remortgage consultation as well as carefully considering every single remortgage situation. Get in touch today and we will see how we can help with finding the right match for your remortgage needs. 

Don’t Pretend to live Somewhere else in Derby

Mortgage Advice for First-Time Buyers

As a first time buyer in Derby applying for a mortgage, you need to be aware of your credit score. You will find that the least amount of addresses you have on your record, the better, though this seems to be something that people are more knowledgeable and aware of nowadays.

The Importance of Keeping Consistent With Your Addresses

Our experienced mortgage advisors in Derby have found they are many applicants who have moved out of their parent’s address into rented accommodation, yet believe that it is a good idea to keep their previous address registered on bank statements, credit cards, and electoral roll.

People believe this is beneficial despite being a flawed strategy. Almost every time, if you have moved to a new address, there will be some record of this on your credit report. Your address could be recorded from a delivery address when you have ordered something online or car/home insurance search and many more.

Getting all your accounts (credit cards/ current accounts) and electoral roll changed over to your new address can be the best strategy when you are thinking of taking out a mortgage. At the time of updating your address on your credit file and electoral roll, it’s best to double-check the date in and date out. The consequence of making mistakes with these dates is that it may appear on your records that you are living in two places at once. 

This will show a more open and honest way of trying to apply for a mortgage which will benefit you greatly in your Mortgage application and when it comes to approaching a Mortgage Advisor in Derby.

Get in Touch For Mortgage Advice in Derby

9 Questions to Ask When Buying A House in Derby

First Time Buyer Mortgage Advice in Derby

When it comes to the homebuyer experience, first time buyers in Derby like yourself can find it stressful. It doesn’t have to be that way. Listed below are nine common questions to ask when enquiring about a property that will allow you to make the most out of your house viewing and provide you with some peace of mind.

The 9 most common questions:

1. How much interest has there been in the property/development?

Buying a property can be one of, if not the biggest financial commitment in your life.Therefore, it’s perfectly acceptable to have a good think about whether or not you want to commit to buying a property.

You only have so much time to think about it due to the interest your dream property may be getting. It’s best to find out how many people have viewed your desired property to understand how much ‘thinking’ time you may have before making a final decision. Furthermore, if the property receives a lot of interest, you need to be ready to have a final answer as soon as possible. 

2. Is there a property chain?

A property chain can notably impact some areas of your mortgage process and in particular, how quickly you would be able to move in.

If there is no onward chain, it’s likely the moving process will be swift, especially if you are not part of a chain yourself. Another factor that could speed up the process is if you don’t need to sell your property first. This is because you will not be holding up the home buying process.

Remember to use this tactic when negotiating a price.

3. What comes with the sale?

Some previous homeowners like to leave items behind as a way to save on costs, which could be a big advantage for you. A washing machine, fridge, freezer are just a few they might include, or typically a shed if the property has a garden. 

On the condition the appliances work, it’s a benefit to new buyers as it saves them a bit of cash until they get something new and modern, however, you will have to factor in disposing of them should you not want or need the items.

If you buy a new property, you might have the option to purchase any extras that are brand new and there for you on your moving day.

4. Are the neighbours friendly?

Finding out what your neighbours are like can be a key component to consider when deciding on a property as a good or bad neighbour can make or break your experience. Furthermore, this is especially helpful if you’re moving into an area you are not exactly familiar with.

Deciding to move to new homes can be a risk initially because you won’t know what your neighbor will be like. First impressions are not always important, but it’s always handy to get on with them as you may both be living there for a long time. 

5. How much does it cost to run?

The amount spent on running costs can depend on where the property is in Derby. For this reason, it’s best to ask the right questions as well as doing some research. Topics to look into or ask your seller could be how much the council tax is or the average spend on utilities. As well as being good information to know, it also can help you budget for each property accordingly. 

6. Which way does the house face?

Questions like this can make a significant difference in the decision process because a south-facing garden can be a requirement for some. It’s perfect for relaxing in the garden in late summer evenings as well as reading with natural light. You may find that some locations pay for a more premium price in order to have a south-facing garden because it’s where the position of the sun is throughout most of the day. 

7. After moving in, how much work will be needed?

Here is another significant impact on your budget. Information to find out that may be essential to know include:

  • Making sure the property is energy efficient.
  • Sorting any damping issues (if any).
  • Changing the furnishing.

8. Are you open to offers?

A typical of the house-buying process is negotiating on a property price. Because of this, it’s key to be as prepared as possible to make an offer on a property that you like. If you are looking to improve negotiating on a property price and being one step ahead click here.

To get an idea of how low in price the seller would want to go, it’s best to chat with the seller or estate agent. Also, ask if any other offers have been made and rejected before your bid.

9. When can we move in?

When planning what you need to do before moving in, it’s best to set out the date of moving first. From this, you can plan out other jobs such as instructing a conveyancing solicitor, packing your belongings, and arranging a removal van to transport your belongings to the new property.

Moving Home Mortgage Advice in Derby

How to get a Mortgage if You’re Over 40

Open & Honest Mortgage Broker in Derby

Straight away, the answer is yes, you can get a mortgage over 40 years old. This does, however, depend on your situation.

In some circumstances, where your mortgage term extends past your intended retirement age, you may be required to provide an estimation of your pension income to your lender.

Over the years we have seen lots of declined mortgage applications from first-time buyers in their 40s. We often find that when dealing with customers aged between 45-54 with declined applications during the last two years, the reason for being declined was due to their age.

Why are over the 40s being declined mortgages and what can be done?

In the past, when you visited a building society to seek a mortgage, you’d likely have an appointment with a Branch Manager or Mortgage Advisor. This was before computerised credit scoring and regulations that we know today. The decision process of whether to approve your application would be them looking at personal circumstances such as how well you’ve managed your current account. If they decided to accept your application, then you would be advised of how much you could borrow. This would typically be a multiple of your gross salary.

These income multiples don’t account for age so, you could borrow the same amount if you were 30 or 50 years old. Even though this seems fair, suppose both applicants were due to retire at 65 years old, it would have different effects on both individuals. Let’s explore this example of using a £70,000 (capital and interest) mortgage using a notional interest rate of 5%.

  • 30-year-old – 35 years mortgage term – £252pm approx.
  • 50-year-old – 15 years mortgage term – £395pm approx

This example shows two identical earners with the same mortgage debt, but the second applicant has a higher monthly payment. Therefore, the risk of repossession and arrears due to the mortgage rates shooting up is likely. This reason is why modern mortgage calculators consider the maximum term of the mortgage (i.e. your age) along with income and expenditure.

Retirement age

Despite being constantly reminded that we will be working until an older age due to State Pensions, banks don’t seem to consider this when granting a mortgage.

One of the requirements when it comes to lenders granting a mortgage to someone beyond retirement age is that you would need to demonstrate that you can afford the payments after retiring. To prove this, it’s best to obtain a letter from your pension provider that showcases your future income. The problem is that the majority of people reading this will likely take a reduction in income at retirement. Therefore, it’s expected that you can still afford your mortgage from that reduced income. In reality, this can hardly be a success unless you require only a very small mortgage so you wouldn’t probably need to stretch the mortgage past your retirement age anyway. 

In 2011, the default retirement age was scrapped, and your employer can no longer force you to retire. Therefore, fewer lenders are using the State Retirement age as the age you must have your mortgage paid off by, and the majority are letting people decide the age they intend to retire.

Preparing for a mortgage at over 40 years old

When you’re over 40 and seeking a mortgage, you are questioned on how you would afford your mortgage in the later years. It’s key to remember that these regulations are there to protect consumers and sensible lending. In some circumstances where your mortgage term runs past your normal state retirement age, you will need to demonstrate that you can keep your payments sustained and provide this proof if requested.

Please note that the above information is for reference purposes only and is not to be viewed as personal financial or mortgage advice.

The Credit Crunch

The Credit Crunch Explained in Derby

In the beginning

Firstly, we need to look back at the years that lead up to the 2007/08 “Credit Crunch”. In the 1970s and ’80s, if a first time buyer in Derby took out a mortgage, it was likely through a building society. Surprisingly, banks didn’t always do mortgages!

The process to know if you could qualify for a mortgage involved making an appointment with the building society manager. Customers would take out savings accounts with them, and this money would go towards the building society to lend to other customers. In order to make a profit, interest rates were higher when dealing with borrowers compared to savers. 

When it came to the banks going into mortgage lending, they moved away from the older model. Alternatively, they would look at the markets to ‘buy’ the money. This would accelerate the rate at which they could lend to customers.

Mortgages in The 2000s

Skip to the mid-2000s, and the market was full of new specialist lenders, with many originating from North America. Their method allowed them to raise their new money and lend again by selling their book of mortgage customers.

This was dubbed Securitisation. These books were bought by investors and were typically from larger institutions such as pension funds and high street banks. 

Due to the market making a large amount of money, the new lender’s created lending criteria that was more relaxed. A poor credit score or wanting to self-certify was no problem, or so they thought.

Problems arise

As mortgages began to default, major banks lost their confidence in each other. This was because they were uncertain of how exposed they were in the quick unraveling sub-prime mortgage market.

The banks’ share prices dropped. The UK Government (or more specifically, the taxpayer) bailed out some banks to stop them from going bust, however, many failed to continue.

Almost 80 different banks, building societies, and lenders, across around 20 different countries, filed for bankruptcy or were acquired. This was named “The Great Recession”.

Due to this, lending quickly dried up. Everyone lost confidence in the UK economy and property prices significantly dropped. The market took almost a decade to safely recover.

Economy recovery

Investigations were undertaken to look into where it all went wrong, as nobody, especially the UK government, wanted it to happen again. This led to the creation of the “Mortgage Market Review of 2014”.

By this time, self-cert mortgages were banned, but the biggest change was the lender’s responsibility to ensure mortgages were affordable.

Lending criteria tightened as lenders were required to look more into customer’s incomes and outgoings. Credit commitments, childcare, and other outgoings were taken into account so lenders could have confidence that customers could consistently afford their mortgage repayments.

These days it’s a lot harder to get a mortgage. Customers are expected to be a lot more organised with paperwork to prove their finances are taken seriously.

Mistakes were made in the time running up to Credit Crunch, but we hope that the industry learned a lesson from this event and continues to minimise the chance of this ever happening again.

Mortgage Advice in Derby & Derbymoneyman are trading styles of UK Moneyman Limited, which is authorised and regulated by the Financial Conduct Authority.
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