If you would like to be in a new home before Christmas, you’ll need to move fast.
There’s only a little over eight weeks until Christmas, while the average property purchase takes around three months to complete.
For many the key hurdle is getting the finances in place, but a mortgage can be in place in six weeks if all goes smoothly.
So if you are buying a straightforward property — such as a new build, perhaps — then it’s perfectly possible you could be in your home by Christmas.
‘The housing market is buoyant, because demand is far outweighing the number of homes for sale. But if you are well prepared, there’s no reason why the transaction won’t go through in time for Santa’s arrival,’ says Sarah Thompson, managing director of broker Mortgage Scout.
If you want to get your mortgage deal done fast, here’s what you need to know.
Speak to a mortgage broker
A broker is likely to make the process of applying for a mortgage much less stressful. It can be tricky for a buyer to know the exact criteria of each lender, and there is a risk you may apply to a lender and be rejected.
This will slow down your house purchase progress, and it may even affect your credit score.
Some lenders will allow you to borrow more money than others, and they may have differing views on what counts as suitable sources of income. A mortgage broker should be confident which lender is best for your circumstances.
Some mortgage brokers charge a fee — perhaps anything up to £500. Others don’t charge a fee, and will earn their fee through commission from the lender.
Paying for a mortgage broker may give you access to a wider range of deals, as fee-free brokers may prioritise a lender that pays higher commission.
Get a mortgage in principle
A mortgage in principle is a statement from a lender telling you how much you may be able to borrow.
One can be drawn up very quickly, perhaps within a few minutes. It is not a guarantee, but it does give a good indication of how much you could borrow through a mortgage.
Having a mortgage in principle will also show estate agents you are likely to be a credible buyer. You can get a mortgage in principle directly from a lender, or through a mortgage broker.
Gather relevant paperwork
When applying for a mortgage, you will have to supply evidence of your financial position, and it’s worth gathering as much documentation as you can in advance.
Lenders will want to see at least three months of payslips, recent bank statements, your employment contract, and your latest P60.
If you are self-employed, it’s worth getting proof of earnings for the past three years. If you complete a self-assessment return at the end of each tax year, this means downloading your SA302 tax calculations from the HMRC website.
‘If you are working with an experienced broker, there is no reason why you can’t have funds released within six weeks.
Submit all the above documents as fast as you can, and pay your conveyancer to start property searches on the day the mortgage application goes in,’ adds Emma Jones, managing director of Alder Rose Mortgage Services in Cheshire.
Know your budget
Most people will finance a property purchase through a combination of savings and a mortgage.
To work out how much you can afford to pay for a property, you’ll need to calculate how much you can put down as a deposit through savings, and how much you could borrow.
As a general rule, lenders typically loan around 4.5 times your annual earnings. The best mortgage deals are available to people with a 40% deposit, but it’s possible to find lenders that will loan money to those with a 5% deposit.
Is now the right time to buy?
UK house prices have surged since the start of the coronavirus pandemic. This has been fuelled by the temporary stamp duty holiday, which has now expired, and changes to working patterns that mean we’re looking for bigger homes and garden space.
However, interest rates are currently at record lows and mortgage companies are offering competitive deals. If you are able to put down a deposit of 40%, you may even be offered an interest rate of close to 1% on a five-year fix.
There is speculation the Bank of England could raise interest rates over the next year to tackle rising inflation. This is likely to increase mortgage rates, meaning you pay more interest each month.
So if you are considering buying or remortgaging, now could be a good time to lock in a good deal before any potential rate rise.
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