You’ve finally identified and located your ideal home – now it’s time to start thinking money and the mortgage you will need to buy the property.
To secure the most professional, independent advice and information about the many competing mortgage products on the market, you might want to consult a mortgage broker. You have the first meeting lined up, so, what happens at a mortgage broker appointment and what questions are you likely to be asked?
An article in the Telegraph newspaper on the 1st of April 2020 discussed potential flexibilities. Still, it reiterated that it is a requirement of the Financial Conduct Authority (FCA) for financial advisers – including mortgage brokers – to confirm the identity of their customers. This forms part of the finance industry’s collective efforts to curb the menace of money laundering.
When you go along to the first meeting with your mortgage broker, therefore, get this formality over and done with by taking along your passport or your driving licence to confirm your ID.
Proof of address
You will also need to take along some proof of your address – together with any changes over the past three years, if there have been any. Your address helps confirm your identity and may be used by lenders when checking whether you are on the electoral roll at that address as part of their credit checks.
Proof that you are living at the declared address might be by way of a utility bill or bank statement (issued within the past three months).
The credit reference agency Equifax explains that during your appointment with your broker he or she will be anticipating lenders’ concern for evidence that you can afford the mortgage repayments – safeguarding money lent and helping to protect the financial security of borrowers is probably the principal concern of any mortgage lender.
Your proof of income, expenditure, and regular outgoings, therefore, might be gathered through your showing some or all of the following:
- name and contact details of your employer or employers, together with the dates between which you were employed, for the past three years;
- at least three months’ worth of payslips;
- the last form P60 your employer issued (typically in April or May) which shows how much you earned and how much income tax you paid during the year;
- if you are self-employed, that proof of income may be made through the last two years’ work of SA302 returns (HMRC’s confirmation of how much you have earned and how much tax has been paid) or your audited accounts for at least the same period;
- at least three months’ worth of bank statements;
- if you already have a mortgage, the last annual statement issued by your lender; and
- details of all current outgoings, including the repayment of existing debts, loans, and lines of credit;
- you may be asked to talk about your spending on groceries and other essentials;
- personal wellbeing and grooming (hairdressers, gym subscriptions etc);
- leisure activities, holidays and eating out;
- travel and petrol; and
- insurance policies, pension contributions and credit card balances.
Your future plans – and stress test
Your broker will also understand that any lender wants to know about any plans likely to affect your future ability to maintain mortgage repayments.
With that in mind, be prepared for your mortgage broker to ask whether you have any plans to have children, buy a new car, renovate, decorate or refurbish your home or other property, or conduct extensive repairs and maintenance on your home.
In addition to plans you may have, your broker may also simulate the conditions – and the extent to which they affect your financial circumstances – of significant changes such as an increase in mortgage lending rates. Naturally, changes in interest rates may affect your ability to maintain the mortgage repayments and, if you are likely to experience difficulties in the face of such changes, it is as well for everyone concerned to be aware of that fact now rather than later.
In guidance last updated on the 4th of November 2019, the Financial Conduct Authority (FCA) explained that stress tests became obligatory in 2014 as part of their Mortgage Market Review (MMR) and heightened concerned about mortgage lenders’ assessments of the affordability of loans for borrowers.
Further reading: What documents do I need to apply for a mortgage?