The mortgage or homeowner’s loan market of the United Kingdom is considered one of the world’s biggest, with 13.5 million mortgages valued at 1.7 trillion pounds. Homeownership is comparatively more popular than in many other European countries. 

If you want to know how to go about applying for a mortgage in the UK, continue reading this article as we take you through the different steps involved in the process. 

Who can apply for a mortgage in the UK?

Anyone above the age of 18 years can buy a property in the UK.  Expats, too, are eligible to get a homeowner’s loan in the UK, irrespective of whether they reside in the country or not. The terms will, however, vary from lender to lender. Some of the common factors that are applicable while applying for a homeowner’s loan in the country  are  –

• Age

Age is an important criterion. The borrower must be 18 years or older. In most cases, people belonging to older age groups may find it difficult to get a homeowner’s loan. In general, banks and building societies might ask for a higher initial mortgage deposit if the applicant is older. The term of the loan might be shorter in such a case. 

• Proof of Earnings

Lenders will ask for your income details or proof of earnings as they need to be confident that you will be able to make the monthly homeowner loan payments.  Therefore, freelancers and self-employed in the UK may be at a disadvantage.

• Credit score

This is another important factor that lenders will consider before qualifying you for a homeowner’s loan. They will check your credit history to determine your creditworthiness. If you have a bad credit history or a low credit score, you will have limited options for getting a mortgage. 

• Other Criteria for homeowner’s loan Application

You will need to fulfill the following criteria to apply for a homeowner’s loan in the UK – 

1. You should be a UK resident. 
2. It is not a buy-to-let mortgage.
3. Your income is in pounds (GBP).
4. The mortgage is not borrowing against your existing property
5. The mortgage will be used for your main residential property
6. You do not work for the armed forces
7. The mortgage term is less than 35 years 
8. You are not buying the property through a government scheme

How to apply for a mortgage or homeowner’s loan? 

What do you need to keep ready before applying for a homeowner’s loan?

Before you start applying for a homeowner’s loan, you need to have some information to make the process smoother and faster. This includes – 

• P60 form: The P60 form shows all the details related to your salary. Your employer will issue this form on request. It also shows the tax you pay. 
• Salary or Payslips: You will need to submit your salary slips for the last three months.
• Proof of Identification: You will need to submit a government ID, for example, your driving licence or passport. 
• Utility Bills: The lender will also ask for utility bills or receipts of payment of Council tax.
• Address Proof: You will need to submit your address proof, for example, a bank statement or a utility bill. In most cases, you will need to submit proofs and they must be not more than three months old. 
• Government benefits: If you receive any benefits, you will need to submit documents supporting them. 
• Bank statements: You will also need to submit your bank statements of at least three months indicating banking activities. 
• Details of your debts: The lender will also expect you to share your other debt details.

Self-employed individuals may be required to provide details like their tax return,  account details for the last 2 to 3 years, and expense receipts.

Understanding the Different Types of homeowner’s loan in the UK

In the UK,  you can choose between two types of homeowner’s loans –  variable and fixed rate.  It is crucial to understand the different homeowner’s loan types before applying for one. 

• Fixed-rate Home ownership: These mortgages are characterized by a fixed rate of interest. The rate is fixed for  2 to 5 years. After the end of the fixed-rate period, the rate starts to vary. This is the most popular Home ownership type in the UK. In this type, loans are available for longer tenure of around 25 to 35 years and shorter periods of 15 to 20 years.
• Variable Home ownership: These mortgages are riskier compared to fixed-rate mortgages because the rate fluctuates depending on the general rate of interest. This mortgage type is useful if interest rates start to drop. Most variable-rate Home ownerships in the UK  are the standard variable rate type, where the lenders set the rate, which can change anytime. 
• Discount Home ownership: This is another standard variable rate (SVR) type that comes with the discount applicable for a limited period, usually 2-3 years.
• Tracker Home ownership: In this kind of SVR mortgage,  the interest rate is tracked from a prominent source like the Bank of England.
• Capped-rate Home ownership – In this mortgage type the interest rate cannot increase beyond a certain amount.  That’s because there is a cap on the variable rate Home ownership.
• Offset Home ownership –  This mortgage is linked to your savings account such that  the interest amount is reduced from the account directly.

Step-by-Step Guide to Mortgage Application in the UK

Applying for a homeowner’s loan in the UK involves a couple of steps as follows –

Step 1: Mortgage application

You will first need to complete the application form. Ensure that your personal details,  income details, details of the property that you want to buy,  and your credit history are mentioned properly.

Step 2: Getting the mortgage application approved

Lenders have conditions you must meet to be accepted for a homeowner’s loan. To get approved for a homeowner’s loan, you need a good credit score (improve it by paying bills and credit cards on time), stable income (prove it with pay slips), and be at least 18 years old (21 for buy-to-let mortgages). Some lenders may have maximum age limits.

Step 3: The Mortgage Advisor Appointment

Next,  you may meet a mortgage advisor to seek guidance on the mortgage that is right for you.  The homeowner’s loan advisor  will assess  your current income,  your current debts,  and understand your needs and circumstances. 

You can book your mortgage appointment in several ways –

• You can speak with the homeowner’s loan Advisors at your bank or the building society.
• You can also speak with  Independence Advisors on the phone.
• You can also contact an advisor over email.

Step 4: Getting an offer from the Lender

Once your homeowner’s loan application is submitted,  the lender will take about a month to come back with an offer. It takes that much time because the lender has to cross-check all the details you provided before giving you an offer. You can apply for a Mortgage Agreement in Principle if you need some sort of guarantee from the lender. 

What is a Mortgage Agreement in Principle?

The “Mortgage Agreement in Principle” is sought before filling out the homeowner’s loan application. It is an agreement in which the lender principally agrees to lend you money to purchase your home.  The lender, however, carries out a soft credit check before offering the homeowner’s loan Agreement in Principle. A credit check was carried out to verify the accuracy of the details you provided.  This Agreement is not a guarantee, though. It means that the lender is not under any compulsion to make an offer. Your application will be reviewed thoroughly before you receive approval for the homeowner’s loan.

Once the application has been received, it will go through numerous stages – 

• Loan Interview: The interview mostly happens before or after the application is submitted. You will meet the mortgage provider or speak with them on the phone. This is when you will be advised on the mortgage that befits your circumstances. You will need to get the following documents for the interview: income details, personal identification, and proof of address. The usual questions asked revolve around your monthly expenses, current debts and commitments, future plans, and your current personal circumstances.
• Credit checks: You will need to prove to the lender that you can repay the loan. For this, the lender will carry out a credit check .This involves assessing your personal and financial details like your income and source of income, other outstanding debts, past loan history, credit history, missed payments history, and County Court judgments.
• Valuation of the property: The property you want to buy must undergo a valuation so the lender can determine its market value and ensure it aligns with the sale price.
• Mortgage Offer: After due diligence,  when the lender makes an offer, they agree to lend you the agreed amount. Once the offer is made, the Purchase can be completed.  The homeowner’s loan offer includes your name and address,  the property address and valuation,  and details of the mortgage like interest rate,  repayment amount,  term of loan,  and mortgage fees.  The terms and conditions of the mortgage are also mentioned. This will include property rights clauses applicable during sale and repossession if the borrower is unable to make the repayments.

Apply for a Mortgage in the UK with Cangaf Accountants

You need to understand your financial position when applying for a mortgage in the UK.  Your documents have to be ready.  You need to choose the right lender after considering different factors.  All this can make it pretty complicated. If you need help with homeowner’s loan decisions or applications, contact Cangaf Accountants. We will offer you professional support and guide you through the process.

FAQs

1. What happens if the lender’s valuation and the home price differ?

In this case, your application  will be revised. The lender might lower the mortgage amount.  You will need to negotiate with the seller if the homeowner’s loan is lowered.

2. For what duration is a mortgage offer valid?

 A mortgage offer is usually valid for 3 to 6 months.

3. Is it compulsory for me to accept the mortgage deal?

No, it is not compulsory to accept the mortgage deal. If your application is accepted, you will have a short window to reflect on the offer. Ultimately, the decision to accept or decline the homeowner’s loan is entirely up to you.

4. Can I apply for a loan even when I have other debts?

Yes. You can apply for a homeowner’s loan even with outstanding debt. The lender will approve your homeowner’s loan amount after considering your current debt.

5. Which credit agencies are in the UK?

Equifax, Experian, and TransUnion are the three credit agencies in the country. Lenders and homeowner’s loan companies may check your credit history with one, two, or all three of these agencies.

6. What time period does a credit check typically cover?

Most lenders review your credit history for the past 6 years when making a decision.

7. When can my mortgage application be rejected?

Your mortgage application may be rejected for several reasons, such as a low credit score, errors in the application, or failure to meet other lender requirements.

How to Apply for a Mortgage

A step-by-step guide to getting a mortgage, from affordability checks to approval.

https://www.moneyhelper.org.uk/en/homes/buying-a-home/how-to-apply-for-a-mortgage

Buying a Home: Official UK Guide

Key steps, legal info, and government support for home buyers.

https://www.gov.uk/buying-a-home

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