NO deposit, irregular earnings, or less than perfect credit history?
No problem, Kent-based broker Georgia Holmes can still make your home buying dreams come true.
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Mortgage brokers are responsible for arranging almost 90% of all mortgages in the UK, scouring the market for the best deals, however tough their borrowers’ circumstances.
These experts sift through more than 6,800 mortgages on the market from over 80 lenders, according to data site Moneyfacts, some with weird and wonderful brands that you have likely never even heard of.
As house prices inch up every year and cost of living pressures make it impossible to save, brokers are still managing to match more than two million buyers with their perfect mortgage each year.
We spent the day with Georgia, mortgage adviser at brokerage John Charcol, to find out the secrets of getting aspiring borrowers onto the property ladder.
Fact finding mission
Mornings are when Georgia meets her new hopefuls to take them through an hour-long fact-finding mission.
Personal information, salaries, household bills, debt payments and credit history are all tapped into the computer.
She also delves into why you want a mortgage, deposit size and how much you need to borrow.
Finding out as much about you on day one saves time later on, explains Georgia, 26, from Tunbridge Wells, who has worked as a broker for four years.
“Already at this point I’m getting an idea of the group of lenders I’m going to approach,” said Georgia.
“I can usually let them know now if their goals are achievable or if I think they may need a bigger deposit.”
Mortgage matchmaker
Using a sophisticated mortgage matchmaker tool called a sourcing system, brokers search for the best rates from every lender in the country matching your deposit size.
“We can pull up a list of hundreds of deals in seconds stretching to 50 pages long,” Georgia explained.
Knowing the quirks of every lender by heart, for example which give the biggest income stretches or those that will turn a blind eye to a missed bill payment, the adviser then scans the list to pick your ideal lender.
Here’s where brokers use another secret move.
They know which lenders operate ‘underwriter discretion’ this means which banks will bend their own rules and which won’t.
“We do everything we can to fight our borrowers’ corner,” Georgia added.
“A borrower with a credit blip in the last year could fall outside the lender’s standard criteria.
“But if I include an amazing cover note with your application to highlight all the strengths to your case and the reason why you lost track of your bills, the lender might make an exception.”
Inside track
Secret deals are another perk of being a broker.
“We call them exclusives,” explained Georgia.
It’s when lenders save the best interest rates for borrowers who use a broker instead of going direct.
Brokers also get the inside track on when lender rates are changing.
With up to 48 hours warning, brokers have enough time to collect outstanding paperwork from borrowers so they can lock in a top rate before it rises.
But even if the deadline passes, brokers have a few more tricks up their sleeve.
Every broker firm is assigned a dedicated mortgage expert, a so-called business development manager (BDM) from a lender who can be reached via a hotline and go into the heart of the bank.
“BDMs can do some pretty amazing things,” said Georgia.
“One of my clients had been given a decision in principle on a rate of 5.9% but overnight the lender pulled its rates and their deal went up to 6.7%.
“The BDM was able to get the original rate honoured, which is rare but can happen, even though we hadn’t submitted a full application.”
A big part of Georgia’s day is spent tracking which rates have gone down too.
She always checks to make sure her clients are on the lender’s cheapest rate until just before contracts are exchanged.
“During the three-month house buying process we were able to reduce one borrower’s rate by 0.75% before her mortgage completed,” she said.
Thinking outside the box
People who don’t have regular jobs, a bad credit score or no deposit may think that they can’t get a mortgage but that’s simply not true.
As well as standard mortgage deals, brokers know all the quirkier offerings on the market.
For example, there are 99% and 100% deals for borrowers with little to know deposit and a lender that will give you a mortgage based simply on your renting track record.
Some banks will let you add family members to your mortgage, without making them owners of your home, just to boost your income while others offer up a mortgage that’s seven times the value of your yearly salary if you take out a long-term fixed rate.
There are even lenders that will offer you a mortgage once you’ve been discharged from bankruptcy.
How lenders really view your spending habits
It’s not only about paying your debts on time that matters to lenders, it’s how much debt you have that counts too.
Here are the debt rules lenders and magic numbers you need to know…
- Use no more than 30% of your credit limit
If you have maxed out your credit cards it gives the impression you’re stretching yourself – even if you repay on time.
Stay within 30% to reassure lenders you’re responsible. - Debt should be below 45% of income
Do you have a high amount of debt compared to your salary? Then you might be a worry to your lender. Borrowers with debt of more than 45% of their income could see their mortgage dreams dashed. Pay off car loans or short-term finance before applying. - Savings of 20%
Lenders want to know you’ve got enough money left over for unplanned expenses after your mortgage, household bills and debts have been paid. Aim for 20% of your payslip left over each month.
Georgia’s mortgage miracles
MORTGAGE adviser Georgia Holmes has managed to get these seemingly hopeless cases over the line…
A first-time buyer couple aged 29 were jointly earning around £67,500 but struggled to save enough deposit after paying rent of £900 a month. Georgia found a lender that valued their strong rental track record and offered a no-deposit mortgage that cost only slightly more a month than their rent.
“Home ownership is still possible for those without a large deposit,” said Georgia.
Win: £210,000 mortgage fixed for five years at 5.37%, repaying £1,064 per month.
A 59-year-old single mum nearing retirement needed to remortgage her £95,000 interest-only mortgage to a repayment mortgage instead.
But her £30,500 salary, shrunk by debt repayments made it almost impossible – especially as she wanted to be mortgage-free by age 75.
Georgia’s solution was to add her live-in daughter to the application under what’s known as a Joint Borrower Sole Proprietor arrangement. The 28-year-old’s £30,750 income saved the day.
Georgia added: “The best part – under this type of agreement, her daughter isn’t added to the property’s title deeds so she will keep her first-time buyer status for when she buys her own home.”
Win: £95,000 repayment mortgage fixed for two years at 4.25%, £714 per month.
- Flexible attitude for flexible earnings
Looking to raise £210,000 to transform their home with a mortgage renovation and extension, a self-employed couple were turned down by their bank for the cash so they turned to Georgia for help.
Both applicants had challenges – one a newly self-employed piano teacher, the other a tech repair man who had suffered a drop in income but was still earning a good wage.
“I found an alternative lender with a flexible attitude to their earnings. They’re now on track to complete their project and up their home’s value by £400,000,” said Georgia
Win: £475,000 mortgage fixed for two years at 4.21%, repaying £2,842 per month.