Case Study
27th 5月 2015
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How to successfully apply for a mortgage in UK?

Many friends have kept asking me how to apply for a mortgage in UK. Mortgage lending is not unfamiliar to most of people. But when it comes to your application, it doesn’t seem that simple. Today we launch the first article of the series on how to successfully apply for a mortgage .

To answer this question, first of all, we need to know what the UK mortgage is. British mortgages can be classified in the following ways:

According to property use, there are two main types of mortgage: residential and buy to let.

The mortgage can be divided into personal loans and commercial loans (not included in our services).

The loan can be divided into purchasing mortgage, remortgage, bridging (not included in our services) and secured, etc.

According to the method of repayment, it can be divided into interest only, repayment and mixed .

After knowing the type of loans, have you got a general direction for your mortgage needs? Let me make a brief introduction to the loan application process.

Target price–which should be determined first

How do you determine the target price? In the review of the applications for residential and investment mortgage, the assessment basis of the bank in assessing the applicant’s repayment ability is different. For the former, banks mainly examine personal income and expenditure levels. For local residents, they can generally borrow four to five times of their annual income. In the case of the mortgage application for investment property, the personal income requirement will be looser. Banks focus more on the situation of the property, the rental income and the present situation of the rental market.

In addition to the above indicators, banks will also limit the LTV in order to reduce the risk of bank lending. For residential, the maximum of LTV s 95%. On the other, it is 85% for investment property.

For instance,

Mr. Wang plans to purchase a residential house and he earns £50k a year. According to the bank’s lending policies, the five times of Mr. Wang’s salary is £250k, However, if the property price is £260k, in order to control the loan risk, banks will not allow LTV more than 95%, so the maximum loan amount will be £260k x 95% = £247k.

Moreover, LTV and loan interest rate are closely related. As mentioned earlier, low LTV reduces the risk of bank lending, so lending rates are correspondingly lower. It is not difficult to see from the table below, LTV is reduced from 90% to 80% with a 10% down payment, and the loan interest rate is reduced by 1.86%. Although this is an example of a self-living property mortgage, the change in interest rates is very similar for an investment mortgage.

Above all, how to find the best investment entry point according to one’s economic status and the products of the bank is the first step to successfully apply for a mortgage loan.(to be continued)

Your home may be repossessed if you do not keep up repayments on your mortgage.

The Financial Conduct Authority does not regulate some forms of Business Buy to Let Mortgages and Commercial Mortgages to Limited Companies. Not all services we offer are regulated by the Financial Conduct Authority. Your home may be repossessed if you do not keep up repayments on your mortgage. 

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