Preparing for a Mortgage Interview
If you are making enquiries with lenders about a mortgage you may have arranged to meet their mortgage adviser for a mortgage interview. Preparing for a mortgage interview can be daunting as you will need to provide a lot of information to the lender.
If you fail to prepare properly for a mortgage interview you may find that the lender declines to offer a product altogether and it is important that your information is correct. The good news is mortgage interviews follow a standard process and by reading this guide you can prepare for any questions you might be asked.
Let’s explore mortgage interviews further.
- What is a Mortgage Interview?
- Should you go Direct to the Lender for a Mortgage Interview?
- Questions Your Lender Will Ask
- What is Your Job and How Much Do You Earn?
- What Are Your Monthly Outgoings?
- Do You Have Any Debts?
- Do You Have any Children or Dependants?
- How Much Deposit Do You Have?
- What is the Source of Your Deposit?
- What Type of Property Are You Looking to Buy?
- What Value is the Property You Intend to Buy?
- Speak to a Mortgage Broker
What is a Mortgage Interview?
When a lender provides a mortgage in the UK, they must adhere to strict regulatory guidelines outlined by the Financial Conduct Authority (FCA).
These guidelines stipulate that a lender must ensure any product they offer is affordable and suitable for your circumstances.
To fulfil their regulatory obligations, lenders conduct mortgage interviews (sometimes known as fact finds) to verify the product they can offer is suitable and affordable.
Should you go Direct to the Lender for a Mortgage Interview?
No, in most situations you should not go directly to a lender for a mortgage interview. The key reason for this is that, by doing so, you will only have access to that lender’s product range. This means that you will forego any other product offered from other mortgage lenders in the market.
It’s likely that a different lender, from the many options available, will offer a more preferable mortgage option than your existing lender.
Rather than going to a lender directly, you should consult a whole-of-market, fee-free and reputable mortgage broker, like Boon Brokers. A whole of market broker will be able to research the entire market and use their expertise to make a suitable recommendation. This removes all the aggravation of conducting the research yourself and coming to your own conclusion about the most suitable product for you, which may result in a poor outcome.
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Questions Your Lender Will Ask
There are several questions that you will be asked during a mortgage interview. Some will seem obvious like how much money you make and how much you spend, whereas others may seem perplexing.
Below we outline the questions you can expect to be asked and the reasons why lenders must collect this information before offering you a product.
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What is Your Job and How Much Do You Earn?
The first consideration will be your job and how much money you earn. When you apply for a mortgage product, lenders will calculate how much you can borrow based on your income and expenditure.
Typically, lenders will offer up to 4.5 times your annual salary. However, some lenders may offer more. There are a few lenders that can lend up to 5 times your annual salary if you meet their criteria (assuming that you have minimal financial commitments and a long overall term period).
For example, if you earn £25,000 per year, you may be able to borrow up to £112,500. Because this figure may prohibit you from affording a property it is common to make a joint application for a mortgage with a partner or spouse. Your partner will need to provide the same information as you for the mortgage interview.
Your occupation is also important, and a lender will want to check if it is stable. If you are self-employed you may need to provide multiple years of Tax Calculations and Tax Year Overviews. If you are employed, you may need to show a contract showing permanent employment.
What Are Your Monthly Outgoings?
If you have regular monthly expenditure, this can negatively impact the amount you can borrow. For example, your regular lifestyle expenses will be outgoings that could reduce the amount you are able to borrow.
Mortgage lenders will typically compare your expenditure figures with national averages from the data collected by the Office for National Statistics. If your expenditure is within ONS brackets, the lenders will apply default expenditure values to your mortgage application. However, if the expenditure is far higher than national averages, on those occasions the mortgage lender will account for your personal finances specifically.
Do You Have Any Debts?
Debts are considered priority financial commitments and lenders will want to ensure that you can make all existing debt payments and still be able to afford your mortgage.
If you have significant debts or adverse credit, you will likely need to seek the advice of a mortgage broker. This is because low credit scores or debt issues tend to be risky for most lenders and you might need to source your mortgage with a specialist lender. Whole of market mortgage brokers, like Boon Brokers, will be able to ascertain which lender will be suitable for you, even with adverse credit.
Do You Have any Children or Dependants?
A dependent is anyone who relies on you for financial support. If you have children you will have, at a minimum, some monthly expenditure such as school fees, childcare fees or general outgoings for clothes and food.
Some lenders take this figure and subtract it from your affordability whereas others are not concerned about your expenditure for children and dependants.
In this respect it is potluck whether your mortgage interview is with a lender who is favourable or unfavourable to children and dependants. For this reason, among many others, contacting a whole of market broker like Boon Brokers is more suitable than going direct to a lender.
How Much Deposit Do You Have?
The sum of your deposit is one of the most significant determinants of the interest rate available to you. This is because it directly affects your Loan-to-Value (LTV). The higher your deposit, the lower the risk to the lender of losing their investment if they had to repossess to recoup their funds.
As your deposit increases, you will find that better interest rate options become available. If you fail to keep up on your mortgage payments or find yourself in negative equity, a lender will want to ensure there is a sufficient buffer between the amount you borrow and the property value.
Mortgage lenders typically have a minimum deposit requirement of 5% of the purchase price. You should discuss with your broker/lender how much deposit you can put down as paying a higher deposit often allows you to get the lender’s most favourable interest rates.
Putting a lower deposit amount may seem attractive because the short-term cost is reduced but the higher interest rates will often outweigh the saving you make.
What is the Source of Your Deposit?
Anti-money laundering (AML) checks are required for all mortgage lenders in the UK, and you will need to prove to a lender that you have obtained the deposit legally, normally through savings or investments.
Gifted deposits are acceptable from close family members such as your parents, providing they sign a declaration stating that they have no further interest in that money. It must be a gift and they must not expect you to repay them.
What Type of Property Are You Looking to Buy?
Most lenders have strict property guidelines. You will need to ensure the property you intend to buy meets your lender’s requirements.
For example, most lenders accept standard construction properties made of brick or stone with slate or tile roofs. However, some lenders will not entertain leasehold properties or non-standard construction types.
What Value is the Property You Intend to Buy?
The value of the property must be suitable for the mortgage you want. A lender will ask this to gauge whether they can lend you money and if the mortgage is suitable for you.
Again, the value of your property will directly impact the Loan-to-Value (LTV) from the lender, which will impact the interest rates available to you. The higher the property value, the better the interest rate as a general rule of thumb.
Speak to a Mortgage Broker
You may find it difficult to get accepted for a mortgage even after answering all questions during a mortgage interview. Most popular retail banks have rigid guidelines for lending and prefer low risk lending practices.
A mortgage broker will be able to complete a thorough mortgage interview, also known as a consultation, and then match you to a mortgage lender, rather than the other way around when you approach a lender directly.
Boon Brokers is a Whole of Market Mortgage, Insurance and Equity Release Brokerage. Boon Brokers offers free no obligation mortgage advice.
Contact Boon Brokers to complete your mortgage interview and find the best lender for your circumstances today.