Read on for some sound advice if you’re considering buying a house this year.
Ross Martin blogs:
I spoke to a well-respected mortgage adviser recently about a mortgage application he was commencing for one of our clients. He is someone we’ve encountered several times over the last year so I know that he “knows his onions”.
We were talking about my client’s situation – he had a healthy 25% deposit, and an ostensibly good level of business profits. His wife had already found the next house so pressure was increasing! However, it turned out that he had a ‘second home’ which a family member was living in and covering the running costs. At this point it became clear that it was simply not possible to determine the amount of mortgage a lender would consider without proceeding with a full analysis. We have seen similar instances with a client with a property portfolio of more than 5 properties and another with less than 2 years of running their own business.
Now I knew that the Mortgage Market Review (MMR) had been implemented earlier this year, as an attempt to counter irresponsible lending, but the market does not yet seem to have stabilised and mortgage approvals have been diminishing ever since. Essentially MMR has had the effect of ‘throwing the deck of cards in the air’ and we don’t yet know how they have landed.
And analysis really does mean analysis. You even need to detail the amount you spend on “entertainment” (I assume we are not talking about the Fisher Price Jumparoo which I am currently looking at). So no more ‘take your income and multiply it by 4.5’, no easy formula, it was to be a bespoke and complex calculation depending on the lender.
So, my first point is really to get your ship in order. Get all your bookkeeping up-to-date, your year-end accounts and tax returns submitted (they’re going to ask for it anyway). Also, engage a decent mortgage adviser.
The practical reality this year seems to be that you might need to apply for a mortgage first to see what value house you can shop for.
If you’d like us to refer you to a suitable mortgage adviser give Ross or one of the team a call on 01326 660022.
Ross Martin ACA