Since April 2014, lenders have to look much more closely at whether you can afford a mortgage because of new regulations.
This means it might take longer than you’re used to and you’ll have to provide proof of your income and all your outgoings.
You could be asked for:
- your payslips and bank statements to prove your income, or
- your tax returns and business accounts completed by an accountant if you’re self-employed.
Your outgoings will be set against your income to see how affordable your mortgage is.
They will look at your:
- household bills
- other debt repayments, and
- living costs such as travel, childcare and entertainment.
They’ll also check how you would cope with an increase in the interest rate or changes in your lifestyle such as losing one person’s income in the case of couples.
This means you might find it hard to remortgage to a new lender.
So before you switch, check your remortgage costs and contact your current lender to see what deals they will offer you.
If you’re on an interest-only mortgage you will find lenders will look closely at your repayment plan to make sure it’s on track to pay back the original loan at the end of the mortgage.
If it isn’t, you might find it difficult to switch to a new interest-only mortgage.
If you decide to switch to a new mortgage on your own you’ll have to research the market and choose a product without any help or advice.
Once you’ve made your choice, you’ll need to give the lender detailed instructions about:
- the value of your home
- the mortgage you want
- how much you’re borrowing, and
- how long you want the mortgage to last.
This is known as execution-only, so the lender will write to you confirming you haven’t had advice or an assessment of whether the new mortgage is suitable for you, which you’ll need to confirm.