Are you mortgage fit?
New Year’s resolutions often focus on getting fit and healthy for the year ahead, so in this article we ask if you are mortgage fit and ready to move. Before we show you five ways to get fully prepared to act decisively in the housing market, let’s look at why the turn of the year is such a busy time in the market.
New year, new property?
Historically November and December see a slowing in the housing market with very few people wanting viewings taking place over the Christmas period, or people not wanting to start the process of packing and instead enjoy one last Christmas in the family home. However, January can be a very different beast…
New Years Day is typically the busiest day on property website Rightmove with the first working day back being the same for high street estate agents as their phones are ringing with potential movers asking for valuations on their properties in readiness for instructions.
The time is now
At Professional Contractor Mortgages, we find that our clients are often motivated to move after Christmas. This can normally be attributed to upsizing or downsizing:
- Clients look to upsize as they have outgrown their existing space. A busy Christmas with lots of family visiting can bring frustrations with their existing property to a head – this is especially true with young families.
- Other clients downsize for the opposite reason. For example parents with older children that have flown the nest (and have children of their own) no longer need the space in what was the family home. As they think about the future, this group often look at ways they can cut costs, and potentially release equity, with a smaller property.
On top of these seasonal factors, the economic outlook caused by last year’s political turmoil brings further motivations into play:
- Current properties or mortgages may no longer be affordable with the sudden increases in interest rates and the spike in the overall cost of living.
- Homeowners may want to move to other areas of the country to cut the cost of transport by being closer to family or take advantage of lower house prices for the benefit of being mortgage free.
- With predicted reductions in house prices, now may be the best time to sell, to generate the best offer in what many are suggesting with be a depleted housing market for an extended period of time.
Five ways to get market ready
So, if you are thinking of moving this year, a property investor or you are a first time buyer wanting to take advantage of reduced prices, here are the five things you need to have in place or be aware of in readiness:
1. Check affordability
How much can you borrow? With changes in the interest rates, lenders are seen to be less generous with lending with historic 5x income multiples being very difficult to come by.It is imperative you understand what the maximum you can borrow is.
This helps you understand your house purchase budget. Speak to one of our consultants today to understand the maximum amount you can borrow and the terms and conditions of that borrowing.
2. Calculate the full cost of moving
Whilst we have seen the tightening of the purse from the government in recent months, one change that will benefit home movers is Stamp duty reductions, reducing what was a significant cost however there are other costs to take into consideration: Estate agent fees; solicitor costs for purchasing and buying; removal charges; lenders redemption charges; lenders new borrowing charges.
Moving can be expensive so as part of our research, we will breakdown the costs so you are fully aware of what funds you will need to have available so ensure you can move.
3. Contractor? Talk to the contractor mortgage experts
With changes in IR35 now established, this has impacted many contractors being misrepresented when they speak to mortgage brokers or lenders as simply being either employed or self employed resulting in less than desirable levels of affordability. Just because a broker says you can borrow X amount, doesn’t mean the underwriter agrees.
With lots of confusion around umbrella company payslips and low levels of withheld profits, many contractors face disappointment. Speak to the experts today where we can identify what the challenges are, but also how our bespoke underwriting can overcome these to ensure you can obtain mortgage funding.
4. Get stress tested for buy-to-let
With the buy-to-let market growing rapidly, and more first time landlords that ever, it is equally important you are aware of the changes that have taken place effecting lending for Buy to lets. Lenders have always employed a ‘stress testing’ mechanism that has dictated lending levels, however this has become tougher to pass for many landlords.
Speaking to our specialist team will help iron out the details and the challenges that can influence lending decisions and offer appropriate advice so when the investment opportunity arrives, with confidence, you are able to move forward.
5. Credit file vs credit score
Because of the record low levels of interest over the past 10 years, borrowing had never been cheaper. However, many will be unaware as to how that can impact levels of future borrowing, especially with dramatic changes in interest rates.
Are you aware of the difference between your credit score and your credit file? You may have lots of current borrowing by way of loans, hire purchase agreements and credit card balance and never missed a payment however a lender might be simply unhappy with the amount of borrowing you have.
As part of your discussions, we will guide you through the complexities of credit sensitive high street lenders and ascertain an accurate figure in terms of borrowing taking both your current and future circumstances into consideration.
The good news is that by completing this online enquiry form, you’ll be put in touch with a specialist broker today to discuss your specific circumstances and understand your options.
Take advantage of the market this new year to build the future you desire for you and your family, by calling PCM on 02394 212912 today.