As with any part of the world, securing a better mortgage rate in the UK can feel like trying to balance too many things at once. It doesn’t have to be daunting, though; by making a few smart moves, you could shave years off your payments and save thousands of pounds in the long run. Perhaps you’re applying for the first time or dreading the process of remortgaging–either way, here’s what you need to do to get a better mortgage rate.
Improve Your Credit Score
Lenders like to see a history of reliable repayments, so if you keep your credit score looking good, negotiating a better mortgage rate is going to be easier. Start by paying off any lingering debts and continue to avoid missed payments from there. Then, keep your credit utilisation low, which is the amount of credit you use compared to your limit, and you’ll be surprised at how much of a difference this can make.
Save for a Larger Deposit
A bigger deposit generally means better mortgage rates, so if you can manage to save 20% or more, lenders may view you as less of a risk. To make this happen, cutting back on non-essential expenses or taking on a side hustle for extra income will likely be necessary, but at the end of the day, it can help you build up your savings more quickly.
Reduce Other Debts
As we touched on earlier, clearing other debts before applying for a mortgage can show lenders that you’re financially stable. Even reducing outstanding balances on things like car loans or personal credit cards can make your application more appealing. It’s not just about what you owe–it’s about demonstrating control over your finances.
Check Your Eligibility
Before applying for a mortgage, it’s worth checking whether you meet the lender’s criteria or not. Some lenders prefer applicants with steady employment, while others may focus on self-employed income. Looking into the specific requirements of different lenders could save you time and effort down the line because otherwise, all your negotiating could go to waste.
Use a Mortgage Broker
If you want to get the best out of your mortgage rate, use a mortgage broker, as they often have access to deals that aren’t available directly to the public. A good broker can assess your financial situation and recommend the best lenders for your needs. Furthermore, they’ll also handle the application process, which could save you the hassle of dealing with paperwork.
Keep Employment Stable
Unsurprisingly, lenders like stability, so being in the same job for at least six months can boost your chances of approval. Therefore, if you’re considering a career move, it might be wise to wait until after your mortgage application is sorted. Changing jobs mid-process can raise all sorts of unnecessary questions, so keep this in mind.
Gather Financial Documents Early
When you get all of your financial records organised before you apply for a mortgage, the negotiation process can be a lot smoother. Pay slips, bank statements, and proof of any bonuses or commissions may be required. Trust us–being prepared can help you avoid delays and show lenders that you’re serious, potentially reducing your rates.
Avoid New Credit Applications
It’s never a good idea to open new credit accounts just before applying for a mortgage, as this can lower your score temporarily. Lenders might also view it as a sign of financial strain, so try to keep your financial activity steady and looking smooth in the months leading up to your application, and this will no doubt work in your favour.
Consider Fixing Your Rate
If you’re remortgaging, locking in a fixed rate might offer some peace of mind during uncertain economic times. Fixed rates guarantee your payments will stay the same for a set period, helping you budget more effectively. However, it’s worth weighing up the pros and cons with your lender or broker, as a fixed rate won’t be ideal if your rate would otherwise be due to fall.
Compare Deals Online
As with any other online purchase, make sure you shop around for the best rate when choosing a mortgage. This isn’t just about convenience; it’s about making sure you don’t overpay. Comparison websites can give you a snapshot of what’s available, but remember that these don’t always include every lender. To get a full overview, combine online research with advice from a broker, and you’ll have yourself a winning strategy.
Build a Strong Application
A well-prepared application is much more likely to impress lenders, so when applying, highlight how stable your income is, how your outgoings are manageable, and if you have any savings. All of this will make your case a lot stronger, especially if you tailor your application to the lender’s specific criteria, which might give you an edge over other applicants.
Consider a Guarantor
It might not be ideal, but if your finances are tight, having a family member act as a guarantor could open up better rates. They’ll need to agree to cover your payments if you can’t, so it’s not a decision to take lightly, but it could make a huge difference in tricky circumstances.
Negotiate Directly With Lenders
If you want a better mortgage rate, don’t forget to negotiate directly with lenders. Believe it or not, some lenders may be open to discussing your rate, especially if you’re remortgaging or switching to a new deal. Try highlighting your loyalty or comparing their rate to others in the market, and this could give you some bargaining power. Even a small reduction could lead to significant savings over time.
Keep an Eye on Your Loan-to-Value Ratio
It might seem like jargon but don’t overlook your Loan-to-value (LTV) ratio, which represents the percentage of your property’s value that you’re borrowing. Lowering your LTV by saving for a bigger deposit or improving your property’s valuation can help you access better rates. The closer you get to 60% LTV, the more options that are likely to open up.
Research First-Time Buyer Schemes
If you’re buying your first home, don’t underestimate the value of government schemes like the UK Government’s First Homes scheme or shared ownership. These schemes often require smaller deposits, but it’s essential to understand the terms and conditions. Some may involve restrictions or fees, though, so reading the fine print is crucial.
Be Patient and Plan Ahead
Above all, timing can be everything when you’re trying to find the best mortgage rate. Rushing into an application without preparation could cost you in the long run, so take the time to save, research, and polish your finances first. Yes, this might feel slow, but it can lead to a much better deal. Overall, patience often pays off when it comes to mortgages, as with everything in life.
