The Broker: Mortgage advice from the experts mouth - 'Should I reign in my spending?'

Posted on 19 July 2016

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I’m hoping to buy my first house – do I have to live like a monk so my bank statements look suitably clean?

IT’S true that lenders now look far more closely at bank statements as part of the move to affordability that came in with the Mortgage Market Review in 2014, but you don’t have to embrace total abstinence. Look at your bank statement and analyse exactly what you spend your disposable income on. It’s amazing how all those coffees and lunches add up, and you will soon see where you can make savings. Lenders like to see borrowers living within their means, so just because you have an overdraft doesn’t mean that you always have to use it.  And be careful using one account for absolutely everything. It can be worth having one account for bills, rent, mortgage payments, food shopping etc, and another for entertainment, to show lenders you can be sensible and keep your spending separate.

I’ve had bad credit card debts in the past – does that mean  I can never buy a house?

PAST bad credit card debts don’t mean you won’t ever be able to buy  a house, but they don’t necessarily present you in the best light to a lender who has one major burning question: ‘Will you pay my mortgage?’ A lot does depend on how historic these credit problems are, and also whether they’re now back up to date. It’s also useful to know what caused them, as if there are extenuating circumstances, this will aid your cause. Get a copy of your credit file and see exactly what the damage may be. Another factor is how much deposit you have to put down. The general rule is the bigger the deposit, the more discretion a lender may have. Some smaller regional building societies can have more flexibility.

I’ve had a mortgage offer, but it has a retention clause in it – what does this mean?

A retention is a sum of money that the lender is going to hold back from the completion monies on the advice of the mortgage value. The lender will still lend the full mortgage on the offer, but because there’s work required on the property that the value has deemed ‘essential’, the lender holds back a sum of money to cover these essential works to the property. It’s unlikely that these works will be anything too major, but because they’re classed as essential they need doing quickly, and a retention is the best way for the lender to ensure this is the case. You, the borrower, have to find the money to get the works done and then, once they’re finished, the property can be re-inspected and the retention monies will be released to you.

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