What is a Decision in Principle?

WHAT IS A DECISION IN PRINCIPLE?


A Decision In Principle is an initial agreement from a mortgage provider, giving us a fair accurate idea of the amount they will lend you based upon your income and an assessment of what is ‘affordable’. Our job as your Mortgage Broker is to match you to the right lender or lenders and make that approach on your behalf. For most lenders your don’t need to have found a property at this point although an idea as to whether the property will be Freehold or Leasehold is useful to use as this can affect the lender we may choose for you.

Please be aware that a credit check is made at this time. In most cases this means that a ‘footprint’ will be left on your credit file, which other lenders may be able to see if they carry out checks themselves. This shouldn’t concern you unless you have a lot of credit checks done over a short period of time. We can discuss this with you to make sure you are aware of the facts and answer any concerns you have.

Once we have a positive decision, most lenders provide a letter or certificate which will show that a mortgage has been approved, ready for you to show to an Estate Agent that you can afford to buy a property.

PRA Shakes up Buy to Let Mortgage Market

PRA SHAKES UP BUY TO LET MORTGAGE MARKET


Hot on the heels of the second property stamp duty hike in 2016, the phased restriction of Buy to Let mortgage interest relief rolls out in April 2017. Not only will these changes increase your tax liability but there may be other implications such as the loss of Child Benefit, due to the High Income Child Benefit Tax Charge.

This is not a new story and you’ll probably be aware of this already. However, the PRA decided in September 2016 that with expected lower net rental income available, a landlords ability to afford their investment mortgage may be restricted. Therefore, from January 2017 new rules are in place that will increase the rental coverage needed on new Buy to Let mortgages. In general terms the 2016 industry standard of 125% coverage at 5% interest, has increased to 145% at 5.5% interest.

So what does this mean in pounds and pence?

In 2016 a gross rental income of £1,000 per month would have yielded a mortgage of £192,000. Using the new calculations, this same scenario would yield a mortgage of just £150,470. That’s around 22% LESS than last year!

The good news is that there are options, so if you would like to find out more please call us on 01245 471533 or click here

How do I apply for a mortgage?

HOW DO I APPLY FOR A MORTGAGE


Well you start with a pen, a piece of paper and a nice cup of of coffee. And then relax as we will be doing most of the work for you!

The initial step is to think about:

  • What kind of home do I want?
  • How much is it likely to cost?
  • What is my monthly budget?

The next step is to talk to us at Easyswitch Mortgages so that we can establish if you are in the right ball park. Although we do try, we can’t work miracles but we do promise to be honest with you. If we think you are stretching yourself too far, we will tell you!

But lets assume all is good here. The next to stage will be to obtain a Decision In Principle for you. Once we have organised this, you should have a nice shiny Mortgage Certificate to waive at the Estate Agent confirming that you have the means to buy to the property.

The ball is very much now in your court. You need to arrange as many viewings as possible to make sure you find your dream home. Be careful not to let your heart completely rule you head (although of course this is part of the fun in buying a home) and if we think you are making a really bad decision we will tell you. Once you have decided on the home for you, you need to agree the price through the Estate Agent.

Now the serious stuff begins and this is where magic happens. Nobody (in their right mind) wants to borrow a large sum of money but unless you have cash to buy it outright, you’ll have no choice. So our job is to do all we can to make the the dream come true. And the dream is to buy your home.

The next stage is to make the full application and instruct your solicitor. Again, we will be dealing with the mortgage application for you so we will need to set some time aside to get the relevant information from. You will also need to get all your paperwork together so that we are completely up to date and prepared. At this point you may need to pay a mortgage valuation fee, but of course we will go through all the fees and terms of the mortgage with you so that there are no nasty surprises.

Once the lender has completed all their checks and the mortgage valuation has been received they will issue the mortgage offer, which will be sent you, ourselves and your solicitor. Thereafter you are very much in the hands of your solicitor who will be carrying all the necessary checks to make sure the property is suitable for you.

 

 

What documents will I need

WHAT DOCUMENTS WILL I NEED?


This will vary depending on the type of mortgage you require. For example, the documents we will require for a Buy to Let mortgage can be different from those needed for a residential mortgage. But in general you should look to get the following ready:

We need to prove your income and this will depend on whether you are employed or self-employed

EMPLOYED
Last 3 months payslips and latest P60. More evidence may be required if relying on bonuses and/or overtime and commission

SELF-EMPLOYED
Generally the last 2 years SA302’s and Tax Year Overviews. Sometimes an accountants reference may suffice

PROOF OF IDENTITY – normally a valid driving licence or passport

PROOF OF ADDRESS – We understand that you may not have Utility Bills if you live at home with parents, but we do need to have evidence of your current address, which could be an original bank statement or your driving licence card. Just make sure your current address is the same on all the bank accounts, credit cards, etc

PROOF OF DEPOSIT – This might be an up to date bank or building society statement. Some lenders also need to see how this has been built up over time. Gifted deposits are also quite common and we will be able to advise you further here as it vary’s

CREDIT REPORT – As part of the mortgage process lenders will carry out a credit check, which will look at whether you have kept up payments on existing commitments, and whether you appear on the Electoral Register. It is vitally important that your personal credit file is accurate and up to date, so we strongly recommend that you set up an account and carefully check your report. We recommend that you use Checkmyfile.com, as this pulls information from all four credit agencies and provides an easy to read report:

From a lenders perspective, a good credit report carries an awful lot of weight in the decisioning process. Conversely, a poor report can have a significant negative impact on your application, so it’s vital that your report is accurate and up to date.