Banks and mortgages

[TPMB12]

What's it like getting a new mortgage these days? A long time since my last application. Are they stricter with the rules? What are the rules?

Basically, I'm guessing they check income through bank accounts and possibly pay slips. If you're a couple do they do things or look at it differently than if just one applicant? What about a career change into a business with short term contracts? Would they look at someone with only a short history in a new career like that?

What are the consequences of a failed application? Does it affect credit history?

Any info or up to date experienced would be gratefully received. I think I know the answers but I'm looking for fresh views and if possible some information from someone who knows about mortgages.

[mrcharly-YHT]

My experience is 3 years old.

It's a bit like having a financial colonoscopy. Supply wage slips going back months. 3 months of bank statements (and they check them). I had a query against individual transactions on my statements; they wanted me to explain why I'd transferred £100 out of my account and to whom (it was to my daughter). We had to account for *everything*.

Yes, for a couple they will take both party's income and expenditure into account. If you have anyone over 18 living in your house, they will want to know about them and their financial situation.

I don't know if failed applications affect credit history.

[TPMB12]

Sounds like it's a lot worse than 15 years ago when I went through an application. I wonder if there's a way to make enquiries only to get an indication of our chances. Kind of finding out what is likely budget for moving house. If we get indications of a lower value mortgage then we probably will rule out a move. If it looks like the budget with a higher mortgage allows for a better house then we would consider it. At the moment the value of the house we would move for is double the equity we have in our house. It's not big by southern standards but round here gets us into a good area with a garden and better house. If we can get a 50% mortgage on one fixed salary and another based on short term contracts. The annoying thing is the person on contracts earns a decent amount and could actually be the safer bet with a mortgage. It's steady but short term contracts. Only not with long enough history. Probably less than a year.

I would be interested to find out if there's a way to informally get a mortgage indication before we make a decision to actually make the change. Especially important would be no effect or very little effect on credit rating if the outcome of that enquiry isn't that good.

[trekker12]

My experience is ten years old but from what I remember they basically carried out an initial check as a matter of course. Fill out a form indicate salaries, credit history, savings, estimated value of current house etc and they return an acceptance or rejection in principle.

Effectively it means nothing but it allows the bank to then advertise that they accept 95% of all applications because they don't count this bit as an application. The second stage (as described by mrcharly) is the actual application. By then the process has separated out those who either are definitely going to not get accepted or those who really cant be bothered.

Different banks have different processes of course

[trekker12]

Also a mortgage/financial advisor will often give free advice as an initial consultation. They know the market and process so can probably give a good idea if you stand a chance of being accepted.

[Quisling]

I took out a second mortgage recently with the same lender as my original mortgage.  However, in the meantime I had taken redundancy and set up my own business - a limited company with less than two years finalised accounts available (I'd only been trading 23 months).  Mrs Q had also changed jobs and only had a few months payslips.  To make matters worse we were spending like water doing up the house (hence we needed a mortgage!) having had an extension and planned kitchen refit so our spending history needed a lot of explaining.  It all took forever.

The bank were reasonably considerate of how our finances work - but as a company director I pay myself a paltry basic salary and top it up with dividends but of course the dividends are not guaranteed (even though the company is just me!), don't show on your P60 etc.

I thoroughly recommend sorting a mortgage out before you leap into the gig economy.  The banks are really set up to assume you have a "proper job".  As a minimum, expect to provide your last P60, three months bank statements, three months pay slips and a breakdown of your monthly expenditure including details of any other loans, overdrafts, HP agreements, maintenance payments etc.  They will be keen to understand your actual ability to pay.

[TPMB12]

That's the core of our issue. One took a pay cut after redundancy and the other is in the gig economy after being a student. Academic gig economy pays good but not good for mortgage applications I suspect.

BTW if we used P60s and pay slips for 3 months I doubt I would give a mortgage if I were a bank. My P60 isn't impressive but it's consistent. I'm not sure my partner even has one. If she does it wouldn't be very much due to student status. Truth is she's the real money earner with work coming in straight after she finishes one contract. Still we're hopeful of longer contracts but it's hard to get anything longer than 6 months.

IMHO I don't think we are in a position to apply for a mortgage until she has 2 years of payslips and P60s. Unless she gets a longer term contract. My concern is that she only sees my equity and thinks that overrides all other factors. At least ability to pay is there IF she keeps up with the contracts. If they ignore her pay as unreliable then we'll get refused.

[Pickled Onion]

When you say contract do you mean employment contract or contract for services?

There are plenty of lenders who will lend on value of contract or combined contract/employment, but you will need a broker, and probably a specialist broker. For a 50% mortgage there should be a range of lenders to choose from (the rates might be slightly higher than the best special offers available) and the broker will be able to give you a figure to work to long before any credit searches are done. Feel free to pm me if google doesn't throw up anything.

[TPMB12]

It's paye employment but for fixed, short terms for specific projects. We might be lucky and get a 2 or even 3 year project but they're quite hard to get.

[Asterix, the former Gaul.]

Are people supposed to buy their habitations nowadays?

Sounds as if not.  But OTOH when I bought my first house I was expected to have a good deposit and to have been a saver with the building society for some time.  Moreover it was a ruin in one of the least desirable parts of town and my neighbours were both medically diagnosed schizophrenics with links to the drugs underworld (I kid you not).  They weren't bad neighbours if left alone and we had no burglaries in the street due to the police interest in the area.  I wasn't allowed the full loan until I'd made the place partly habitable.  So it wasn't so easy as people think.

[Pickled Onion]

It's paye employment but for fixed, short terms for specific projects. We might be lucky and get a 2 or even 3 year project but they're quite hard to get.

That's easier then. A broker will advise but it's likely that many lenders will not differentiate between fixed/indefinite employment contracts.