Strategies for Securing a Mortgage Loan - LDN Finance

Strategies for Securing a Mortgage Loan

If you are earning an income and are looking to get approval for property finance, you might be wondering how best to increase your mortgage affordability. This guide aims to recommend some strategies on how you may be able to increase your mortgage amount. Here is our guide to securing a mortgage in the UK.

Improve your credit score

Having a first-rate credit score is an excellent way of helping you secure a mortgage rate. With a high credit score, you may be more likely to be approved for larger mortgage loans at competitive interest rates. One way to improve your credit score includes ensuring all payments are made on time. This means paying off any existing loans, bills, and debts. Defaults on these can lower your overall credit score.

Try to keep your credit card balances as low as possible and think carefully before applying for any new credit. Multiple applications in a short period can make it look as though you are under financial stress, leading to a lower score. Finally, check your credit report thoroughly for any inaccuracies such as duplicate debt listings, incorrect amounts, or any fraudulent activity. If you find any discrepancies, contact your credit provider or financial adviser, and be prepared to dispute the inaccuracies with evidence.

Get a larger down payment

By applying for a larger down payment, you may be able to qualify for an increased mortgage loan that also allows you to reduce your monthly payments. Keep in mind that the down payment is the deposit amount you pay upfront for property finance and is often expressed as a percentage of the overall home price. Determine how much you’ll need with a mortgage calculator. If you have a good credit score and manageable debts, you may be able to borrow enough to get a larger down payment.

If necessary, cut back expenses where you can. Set up automatic bank transfers for your savings accounts and put any extra funds away such as tax refunds or bonuses to add to your down payment. Set up a high-interest savings account specifically for meeting your down payment goal. Avoid dipping into other savings accounts if possible, such as emergency funds. Finally, check to see what advice and assistance you can get from your mortgage adviser, such as the team from LDN Finance.

Reduce your debt-to-income ratio

Your debt-to-income ratio refers to the amount of debt you currently have in comparison to your current income. For example, if you earn £2000 per month and £500 goes to bills and debts, you will have a debt-to-income ratio of 25%. By lowering your debt-to-income ratio you may be able to increase your chances of being able to secure property finance. Your debt-to-income ratio is measured in monthly payments, and to decrease it you need to either reduce your debt, increase your income, or both.

One way to lower your debt-to-income ratio is to pay off debts ahead of schedule. This will cause your ratio to rise briefly but will decrease once the debt is paid off. Prioritise paying off debts with the highest bill-to-balance ratio: that is, debts with the highest monthly payments in comparison to the overall balance owed. On the income side, you could look to negotiating higher pay at work, or even looking at alternative revenue streams to boost your income such as renting out a spare room or property.

Get pre-approval for a mortgage

By getting your mortgage pre-approved, you can determine the amount that you can currently afford to borrow. What this means is that your bank or mortgage lender agrees to lend you money towards your property purchase, subject to conditions.

Pre-approval can give you a firm idea of how much your mortgage lender is willing to give you in your current financial circumstances. This information will enable you to know what properties fall within your range and so make an offer with an upper limit in mind.

Many real estate agents and sellers prefer to deal with customers who have pre-approval but will offer market-standard lender rates whereas a mortgage broker such as LDN Finance supports you in discovering and maximising your borrowing power based on your net worth. This will give you better negotiating power when making a deal on property.

Work with mortgage lenders and brokers

Working with a mortgage intermediary such as LDN Finance, will see our experts help you to find the best loan for your needs and navigate the complex application process. They may be able to help you out even if you have a less-than-ideal credit score but have a net worth and assets.