Applying for a Mortgage

A mortgage is a type of loan offered to customers by financial institutions, to enable them to buy a property. There are many different types of loan, each with their own advantages and disadvantages. Before applying for a specific mortgage, there are some points to consider:

• Whether a repayment or interest-only payment option would be best for you
• Whether your lender charges an early repayment fee
• Are there any extra fees and charges associated with this mortgage?
• What penalties will be imposed if you miss a payment or a payment is late?
• Whether lump-sum payments, or over-payments are permitted
• Whether mortgage payment protection insurance (see MPPI) is included, or is a condition of the mortgage contract.

Once you have decided how much you can afford to borrow, and which type of mortgage and interest rate you need, you can fill out a mortgage application form. You are usually able to apply online, but you should avoid completing several applications as each one will require the lender to check your credit report. If too many checks are made, your credit rating may be affected, making it harder to obtain a mortgage, personal loan, credit card, or other credit in the future.

Ensure you have all necessary documentation and information to hand before you apply, including: proof of identity, such as your passport; proof of earnings, such as a payslip from your employer; and proof of address, such as a recent utility bill. If you are self-employed and cannot accurately prove your income, you may wish to apply for a self-certified mortgage. In any case, you are typically required to present tax returns and pay slips from the past three months.

When you fill out the application form you will have to provide the lender with exact details of your income and the name of your employer, any savings, outgoings and bank accounts. If accepted, the mortgage provider will send you a mortgage certificate or 'agreement in principle', which you can show to the property's current owner to confirm you are interested in purchasing their home.


Deposit
Before a mortgage lender will accept your mortgage application, they usually require you to pay a lump sum towards the price of the property. This 'deposit' is a percentage of the property's selling price, typically between ten and twenty-five percent. The size of the deposit varies according to the lender and type of mortgage you choose.

Depending on the value of the property you wish to purchase, you may need to save a considerable amount before a mortgage provider will accept your mortgage application. If you are finding saving difficult, you could opt for a guaranteed mortgage, which allows you to borrow up to one hundred percent of the property's selling price. Alternatively, if you have recently completed a degree from a UK university, you may be able to apply for a graduate mortgage. This too could allow you to borrow the property's total price.


Applying for a Mortgage If You Are Disabled
Some lenders refuse mortgage applications from disabled people; they wrongly assume that a disabled person would be unable to maintain a secure income and keep up with mortgage repayments. If you are disabled, ensure you speak to several different mortgage providers and/or brokers to find a mortgage which best suits your needs.

There are several sources of information and advice. The Disability Information and Advice Line (Dial UK) and the Citizens Advice Bureau can offer free, independent, confidential information and advice. You may also find it helpful to speak to an independent financial advisor, since they will be able to offer impartial advice and help find a deal that is right for you. However, you will typically pay a fee for their service and they will not usually be able to advise you if you are disabled and reliant on state benefits.

The UK government offer financial assistance for disabled people wishing to purchase a property. You can apply for Income Support Mortgage Interest (ISMI) via the Department for Work and Pensions. This benefit is available as a supplement to income support, jobseeker's allowance, pension credit and disability benefits. You may be able to receive financial support for the interest and service charges on your mortgage, as well as interest charged on loans which you took out to pay for modifications to the property to ensure it meets your needs as a disabled person. There are a number of restrictions to this benefit; for example, you are only entitled to claim for a mortgage of up to £100,000. If you require further information contact the Department for Work and Pensions via telephone on (+44) 0800 24 33 55.

When making your mortgage application, ensure you are well prepared. Work out a budget which details your income, savings and outgoings. Consider taking out mortgage payment protection insurance. Showing the lender that you are able to meet your monthly repayments, or have insurance that will take over payments when you are unable, gives them less reason to refuse your application.