Improve your mortgage borrowing power

Improving your borrowing ability

When it comes to securing a mortgage, there are a few things to consider. Firstly, you need to ensure you are eligible for a mortgage for the amount you need and are sure you meet the mortgage repayments. This depends on your income, credit score and other financial factors.
There are a few steps you can potentially improve your borrowing power before applying for a mortgage as well as helping ensure you have a better chance of a lender Agreement in Principle (AIP) being successful.
As always, the first step is to speak with a qualified, impartial mortgage adviser. However, here are some points to consider that that might help.

Register on the Electoral Roll

Make sure that you are correctly registered on the electoral register at your current address. This can be one of the key aspects of a lender checking your details through their initial Agreement in Principle process

Make sure your accounts are register to the correct address

Make sure that your bank statements, utility bills, credit accounts etc are all registered at your current address. If you have any of these still going to an old home address or previous addresses that you still have access to, call your bank etc and ensure these are all registered at your current address. Also, make sure that your payslips have your correct address on them and ask your employer to update these if they are still showing an old address

Pay off your debts

If you’re looking to secure a larger mortgage, one positive influence could be to pay off your unsecured debts. This will show potential lenders that you’re a responsible borrower, help with affordability calculations and potentially improve your chances of getting approved for a higher loan-to-value (LTV) mortgage.
Paying off debt isn’t always easy, but it could be worth doing this prior to applying for a mortgage if it means securing the amount you require. Start by creating a budget and making extra payments on your debts each month. If appropriate, you could consider consolidation or refinancing to get a lower interest rate and save money in the long run.

Close any old credit accounts

If you have old credit or store card accounts you no longer use, it’s a good idea to close them. This means actually calling the provider and closing the account (not just stop using it). This should help improve your credit rating. When you close an account, the credit card company will report this to the credit bureaus. Your credit score could then improve because you’ll have one less open account on your report. This also potentially helps due to how some mortgage credit score systems look at the amount of available credit available.

Improve your overall credit rating and profile

Your credit score / profile is one of the most important factors that lenders will consider when you apply for a mortgage. A higher credit score and better profile could potentially more competitively mortgage rates are available due to a wider range of lenders that might consider you as a suitable borrower. Make sure you pay all your bills on time, including your credit card bills and any loans you may have. This shows prospective lenders that you’re responsible with your finances and are less likely to default on your loan.
Also, try to keep your credit card balances low and away from the maximum limit for the card. Lenders like to see borrowers who use their credit cards responsibly and don’t max out their limits. Also avoiding opening new cards, loans or finance prior to applying for a mortgage as this can again be part of the factors that a mortgage lender will consider within their initial agreement in principle process.

Get your accounts organised

If you’re self-employed (Ltd Company, Sole Trader or Partnership) it’s important to get your accounts in order before you apply for a mortgage. This is because the lender will want to see that you're generating a regular income and that your business is stable.
Having up-to-date and accurate financial records and accounts will help to reassure the lender that you’re a responsible borrower and that you can afford the monthly mortgage payments. It will also make the application process quicker and smoother.

Cut your spending

It is important to cut your spending when applying for a mortgage because the lender will evaluate your debt-to-income ratio. This is the amount of money you spend each month on debts, divided by your monthly income. A high debt-to-income ratio may make it difficult to get approved for the mortgage you require.
In addition, having lower monthly outgoings can help you qualify for a more competitive interest rate on your mortgage through having a wider range of lenders that consider you a suitable borrower. This could save you thousands of pounds over the life of the mortgage loan. Therefore, it is worth it to make some sacrifices in your budget in order to get the more competitive and suitable mortgage you can.

Extend your loan over a longer time period

When it comes to applying for a larger mortgage loan, it may make it more affordable to extend the loan over a longer time period. This could help to reduce your monthly payments and make them more manageable, and some lenders could lend more when a longer term is applied for. However, it’s extremely important to weigh up the advantages and disadvantages of a longer mortgage term
For example, you’ll end up paying more interest in the long run the longer the mortgage term is. So be sure to consider all of your options before deciding or speak with a mortgage adviser to get professional qualified advice. If you’re thinking about applying for a longer mortgage term, we can help you assess the various options available to you.

Consider getting other people involve

An option that might improve affordability as well as the range of lenders available for the mortgage you require is to get other people involved as guarantors or as joint applicants. A guarantor is a person who agrees to be responsible for the debt if you, the borrower, cannot repay it. Some lenders might also allow for another person (such as a family member) to be a joint applicant on the mortgage, even though they will not live at the property.
These options usually relate to family members and, as a guarantor, they sign a legal agreement stating that they will be responsible for the debt if you cannot repay it. As a joint applicant they would also be responsible the repayment of the mortgage.
It is important that both you and the guarantor / joint borrower fully understand their responsibilities and how being a guarantor or joint borrower could affect their own ability to borrow in the future. Always speak with a qualified mortgage adviser to talk through this in more detail before making any decisions.

Obtain professional mortgage advice

The most important thing you can do to ensure you get the most suitable mortgage available and correctly understand the options that might be available and suitable is to obtain professional mortgage advice. We are able to help you find the most suitable mortgage product available that will fit with your individual needs and circumstances from a comprehensive range of UK lenders

April 2022

Your home/property may be repossessed if you do not keep up repayments on your
mortgage. Think carefully before securing any other debts against your home/property. Your
home/property may be repossessed if you do not keep up repayments on a mortgage.