There are generally no checks performed in order to obtain indicative mortgage quote, however lenders will always perform a risk assessment on a borrower when a full mortgage application is made

Risk assessments are done both to ensure that the lenders risk is minimised, and so that the borrower does not suffer any financial hardship as a result of the borrowing. In doing so the lender will consider a number of factors in assessing risk.

A lender will undertake an affordability assessment of the borrower by looking at their income(s), and their outgoings to ensure that the borrowing is affordable. Once this assessment has been done, the lender can determine what level of monthly mortgage repayments the borrower can afford.

Ultimately once a full mortgage application is submitted, lenders will also do a credit check on a borrower, usually with a credit reference agency. This will help them determine the reliability of the borrower to repay the mortgage on time. Your credit score is influenced by your previous borrowings, your types of borrowing, e.g. credit cards or payday loans, and how often you have defaulted, etc.

The Financial Conduct Authority (FCA) has made it compulsory for lenders to carry out stress tests on borrowers applying for a mortgage. This requires the lender to assess and predict the effects on a borrower of some kind of ‘financial emergency’, to ensure that the borrower can weather the storm and recover without ending up in a precarious financial situation.

Your deposit is the amount of money you’ve saved up to put towards your first home and it will help determine how much you then need to borrow as a mortgage.

The more money you’ve saved as a deposit, the less you’ll need to borrow from the bank. And if you have a bigger deposit, you’ll have access to more competitive mortgage rates. As well as saving for your initial deposit, you’ll also need funds to put towards fees like property searches, surveys, mortgage arrangement fees, solicitor’s fees, stamp duty, home insurance, removal costs and so on.

There are a number of different types of mortgage available as follows:

Repayment mortgages - With a repayment mortgage your mortgage payments will consist of part interest and part capital repayment. At the end of the mortgage term (commonly 25 years) you would normally have paid the mortgage off completely, and at that point own your home entirely.

Interest only mortgages - With an interest only mortgage your monthly mortgage payments only cover the interest portion of the loan, and no repayment of the principle capital is required. However, at the end of the loan term the principle amount will remain outstanding. While interest only mortgages allow you to make lower monthly payments, you will still have to demonstrate that you have feasible plan to pay off the capital remaining owed.

Variable mortgages - Variable rate mortgages could be fully variable where the lender sets the rate and can change it at any time. They may also be tracker mortgages, which are set to Bank of England base rate plus or minus a particular percentage. There are also other types of variable rate mortgage available including capped and collared mortgages which can have upper and lower rate limits. With any type of variable rate mortgage your monthly payments could go up as or down as interest rates change.

Fixed rate mortgage - With fixed rate mortgages, as you’d expect, the interest rate and your monthly repayments are fixed certain percentage for an agreed length of time. These are commonly fixed to 2,3, or 5 year deals, but there are also some 10 year fixed rate mortgages are available. At the end of the fixed term, your mortgage will usually be switched to the banks standard variable rate (SVR), and this is when most people remortgage their property.

The earlier you can provide the required documentation, the quicker and easier your application will be ...

The information you will need to provide for a full mortgage application is gernerally the same for most mainstream lenders. Many mainstream lenders still won’t accept bank statements printed from the internet, so you may need to request paper copies from your bank. Most lenders will request the following documents:

It is best to have these available a few weeks in advance just in case you have to wait for HMRC to send original documentation to you when required.

It is important to review all the costs associated with a mortgage as well as the interest rate

Most remortgages will have fees and costs attached, including arrangement fees, legal costs, and valuation fees, and some also carry repayment charges or redemption penalties. You will generally need to pay:

1. Valuation fees (some lenders can offer this free as part of a remortgage deal)
2. Administration charge
3. Solicitors legal fees
4. Exit fees (sometimes payable if your existing mortgage has not come to the end of its term yet)

Some lenders can provide free valuations, as a way of securing more business, but others will require a new valuation report do be carried out which will incur a fee. To ensure you have considered all the costs properly, it is helpful to check the APR, as this provides the annual percentage rate which includes the full costs. This is helpful, especially when comparing different providers deals.

It will be beneficial for you to have an Agreement in Principle and solicitors lined up before you start viewing properties to buy. This is because as a qualified buyer you are in a more serious position to proceed to with a purchase compared with the other large number of speculative offers they receive from non-qualified buyers.

Your solicitor will liaise with the mortgage company and the vendor’s solicitor in order to conduct the necessary searches and surveys, and will ensure that all the legal requirements of the process are completed.