Mortgage: How SEISS, Bounce Back Loans & other support will impact your application
Martin Lewis advises on mortgage holidays in latest lockdown
Mortgage deals can be hard to manage at the best of times but coronavirus has forced many industries to change dramatically. Would-be buyers have had to deal with socially distanced viewings, shifting lender priorities and stamp duty alterations throughout 2020 and these changes show no sign of abating, with lockdown rules expected to be in place until at least the spring.
Despite these drawbacks, the property market has never been in a stronger position in some respects, with mortgage applicants keen to take advantage of stamp duty reductions and new deals.
This week, the Bank of England released statistics which found that mortgage approvals had reached the highest level since 2007 in the final few months of 2020.
Additionally, HMRC released quarterly stamp duty statistics yesterday which showed there was a sustained increase in stamp duty transactions in the last quarter of 2020.
Craig Hall, the Head of Broker Relationships & Propositions at Legal & General Mortgage Club, commented on this: “Housing activity in the final three months of last year reached fever pitch as many people looked to complete their property purchases before the Christmas holidays.
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“The ongoing Stamp Duty holiday undoubtedly contributed to his uptick in demand, with the opportunity to save as much as £15,000 in tax encouraging many to press ahead.
“The tax holiday helped to keep the housing market busy despite the impact of the COVID-19. “This week, MPs even debated the merits of extending or tapering the tax holiday and this would undoubtedly help buyers who are in the midst of their home buying journey.
“However, even with the current scheme due to finish on 31st March, it’s important to remember that first-time buyers can access a wealth of schemes aimed at helping them step onto the property ladder. Options include Government schemes like Help to Buy and Shared Ownership. Many lenders also offer specialist family support mortgages.
“Anyone still planning to take their first step on the ladder should speak with an independent mortgage adviser to find out more about their options.”
With the stamp duty deadline quickly approaching, mortgage demand is set to rise again in the coming weeks and months and some fear this demand will slow down processes.
Furthermore, coronavirus restrictions are still in place and it is impossible to know for sure what additional changes the Government may make should infections rise.
As a result of these dynamics Peter Burke, a director at EasySwitch Mortgages, provided advice on how savers can get a mortgage despite coronavirus setbacks.
The important of financial planning
Peter began by examining the basics: “Applying for a mortgage means getting your finances in order as a first port of call.
“The lender will be looking at things like household outgoings, commitments to loans and credit cards as well as your credit rating.
“Key to getting the deal you want is making sure you’ve paid down any overdrafts or debts where possible, in order to paint a positive picture of your financial situation.
WIn many cases, this is a simple case of planning ahead, putting aside those extra savings and reducing unnecessary spending so that you are in a strong position when you begin the application process.”
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The importance of avoiding commitments to credit cards and overdrafts
The ability to qualify for a mortgage is largely dependant on ones credit rating and Peter warned this an element not be overlooked: “Credit card debt and personal loans can hinder your ability to get favourable rates or potentially scupper your chances of securing a mortgage deal altogether. Always remember, the banks will examine these overheads when they make an assessment of the risk associated with lending you money.
“It’s therefore important not to rush into an application until these issues have been reduced or resolved altogether, getting a mortgage is a big financial commitment, so make sure you’ve put yourself in the best position possible.”
The importance of proof of income
It is well known that banks and lenders examine income in assessing a mortgage applicant but many may not be aware of how coronavirus has impacted this.
While the Government has encouraged struggling workers and savers to utilise their various support schemes, it should be remembered that lenders have kept their eye on this: “It’s common practice for lenders to ask to see proof of income, so make sure you have this to hand. If you’re self-employed, you will probably need at least two years of company accounts as well as evidence of personal tax returns.
“Due to the pandemic, many lenders now require three months’ worth of business bank accounts statements, to ensure that the business is in good shape. It is important to provide this as early as possible as brokers will need to be made aware of any financial support or grants your business has needed, such as the Self-Employment Income Support Scheme (SEISS) and Bounce Back Loans.
“If you’re employed by a company then you’ll need three months of wage slips and any evidence of bonuses and supplementary income. Don’t wait to be asked for these vital pieces of paperwork, get them in order before you begin the application process.
“Again, it is important to let your broker know about any financial support you may have recently had, or are still receiving, such as any Furlough arrangements that may be in place, as this will have a major impact on which lender will be recommended.”
The importance of providing documents via a secure upload and the need to apply via video and phone calls
Among the biggest changes seen include the physicality of applying for mortgages, with face-to-face meetings seeming like a distant memory.
Peter concluded by urging applicants to get used to this, at least for the time being, and get up to speed with the new processes involved: “The days of walking into the local solicitors, bank or building society are over, at least for the foreseeable future.
“You need to be prepared to make arrangements, discuss specifics and plan the application and move via online video calls or phone calls. Make sure you have the necessary systems in place to do this, and download the relevant apps and user accounts to enable yourself to be easily accessible online.
“Paper-based documents are increasingly a thing of the past, so be prepared to upload and share confidential information about your personal financial circumstances online. To protect your personal and sensitive documents, often, brokers and banks will ask that you do this using their secure-upload portals, so ensure you have.”
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