New mortgage rules: Advice for borrowers

mortgage agreement

New mortgage rules have been introduced by the Financial Conduct Authority (FSA) on the 26th of April that require mortgage lenders perform a full affordability check on applicants to ensure that they can afford their mortgage now and in the future.

There are a number of actions you can take to improve your chances of getting a mortgage and minimise delays:

Review and keep hold of your payslip and bank statements

Applicants will be required to supply a number of documents that prove income and expenditure which include 3 to 6 months payslips, bank statements and detailed outgoing figures. Self employed applicants will be required to provide track records going back up to 3 years and evidence of work in the future.

Avoid gambling, going overdrawn and using payday loans as they are viewed negatively by lenders.

Create a budget plan

Lenders use affordability calculators that take account of all spending. They will access if you can afford to pay for your repayments now and in the future. Ensure you have sufficient disposable income for all your outgoings and the new mortgage. Also take into account surprises such as a rise in interest rates. Make sure you include any payments that will no longer exist after a new mortgage is taken out and avoid taking out any new debt.

Ensure you’re on the electoral role

This will help lenders identify you. If you are not already on there you can apply to get on the electoral register for free on GOV.UK.

Check you credit report

Lenders use credit agencies to determine your affordability and risk. You can obtain a copy of your credit report from credit agencies such as Experian and Equifax for a statutory price of £2. Make sure that all the details on your report are correct. Contact and try to resolve any issues with the companies in question directly.

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