Making Mortgages Easier

15/04/2019

How Do First Charge Mortgages Work?

In practice, a first charge mortgage is simply a loan provided by a bank or other loan provider; a property loan, which is used to help the borrower purchase equity in a property. Depending on your application and personal circumstances, the mortgage may represent the entirety of the property’s value or may otherwise account for just some of it. 

With more than £1trillion in mortgage lending recorded in 2017 (source: The Money Charity), mortgages remain a very important part of the UK economy and the lives of homeowners throughout the UK.

Second Charge Mortgages

Second charge mortgages, as their name suggests run alongside first charge mortgages. There are numerous purposes including to be used as loans for home improvements, debt consolidation loans, to provide a degree of business funding and more. When it comes to second mortgages however, lenders as well as borrowers are accepting an increased degree of risk. Should the borrower be unable to meet their financial requirements for the first or second charge mortgage, they stand to have their property repossessed.

For second mortgage lenders, the risk entailed stems from the first charge lender having priority, so if the borrower struggles to make their repayments, the first charge lender gets the money from the repossessed property’s sale, with the second charge lender only having access to the funds left over thereafter.

Therefore, it can be difficult, without the right help to successfully acquire second charge mortgages. However, with the right assistance, such as from a second mortgage broker, you can greatly increase your chances of successfully getting the additional mortgage you need.

Why is it Difficult to Get a Mortgage?

With such vast sums of money at stake, banks and lenders tend to very strictly regulate mortgages and the provision of the associated funds. This means that there are numerous, often widely accepted criteria that must be met, all of which will determine whether or not you have the best chances of being accepted for a mortgage.

Can You Improve Your Chances of Getting Accepted for a Mortgage?

In all cases it is a challenge to get accepted for a mortgage of any size and any type for any property. However, there are various factors and criteria which help determine whether or not one is accepted or indeed rejected by a lender for a mortgage, be it a first or second charge.

Whilst it is impossible to guarantee acceptance for a mortgage in any way, it is possible to increase one’s chances of being accepted by fulfilling as many criteria and performing as many good practices with regards to applicant credit and credit behaviour.

Lenders take applicants’ credit practices into account with strong emphasis on whether or not the prospective borrower is a feasible prospect who will be able to repay the loan provided to them. Hence, the better one’s credit record and behaviour, the more likely they will be to be accepted for their mortgage of choice.

Make Sure You Are on the Electoral Register

One of the simplest and most straightforward practices that can be undertaken to improve your chances of being accepted for a mortgage is to ensure you are on the electoral register. This is an important step not only if you are applying for a mortgage, but it is almost always essential for almost any time of loan application made.

Most companies and lenders will look at the electoral register as their first port of call to verify you are who the applicant really is. If you are not on the register, there will be a fairly strong chance that you will be declined for the mortgage. Consequently, you should ensure that you are registered at your current address.

Improving Your Credit Score to Get a Mortgage

Getting a copy of your credit report is simple but certainly worth the time prior to a mortgage application. Many credit reference bureaus will offer these sorts of requests free of charge via a free trial. Trusted credit reference agencies include CallCredit or Experian, and it is worth researching to see if they have any current offers. Alternatively, many companies offer a one-off credit report for a small fee, usually as little as £2.

A good credit score means you will have a better chance of getting one of the best deals currently available on the market with regards to a mortgage and will therefore have more options to choose from. As a result, it may well be worth delaying a mortgage application if you have a bad credit score, in order to build it up positively through positive credit practices.

Checking your credit report allows you to see if there are any items on it that are outstanding that you weren’t aware of, as this can also affect your score. Similarly, regularly checking your credit history allows you to keep an eye on any potential fraudulent actions on your account, which could equally affect your rating if not corrected.

If you are a young person trying to get a mortgage, you might find it especially hard, as it is likely you have little to show in terms of a credit score, which can make the chances of being accepted for a mortgage more difficult. In these cases, a specialist lender may be required to secure an otherwise elusive mortgage.

Close Unused Accounts and Pay off Unsecured Debts

It is important to remember that you will be judged by mortgage providers on how much debt you owe. As a result, it is vital you clear any outstanding unnecessary loans or repay as much as you can afford. This includes store cards, credit cards, and personal loans outstanding.

Joint Mortgages

There are certain factors to consider if applying for a joint mortgage. For example, you must remember that both parties’ credit ratings will also be taken into account. Consequently, if you are applying for a mortgage with a spouse, friend or sibling, it is worth checking before applying to see if they have a good or bad credit history as this can impact your chances of being approved for a home loan.

Saving a Bigger Deposit

If possible, try to attain the smallest mortgage amount you possibly can, as you will have a greater chance of getting the mortgage if you can provide funds upfront. If the bank or lender has to lend you less cash, it decreases an element of risk for them. You may also find that you get better interest rates too in this scenario and some of the best deals on the market are for those who are able to afford a higher deposit.

As a mortgage is secured against your home, your home could be repossessed if you do not keep up the mortgage repayments. Think carefully before securing other debts against your home.

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