Under new lending and borrowing regulations
laid down by the Financial Services Authority (FSA), people aiming to
re-mortgage or purchase a new property are in for a surprise when they find out
they will be unable to borrow more than triple their annual salaries.
The new guidelines are expected to be
announced later this week by the FSA. Hundred percent mortgages are also
thought to be a thing of the past, and there will be a cap on the maximum
amount banks can lend customers.
As long as customers had good credit
ratings and minimum ten percent equity in their home, banks have been lending
up to four times a customer’s income in the past, but things are changing.
We have collected some tips for people to
improve their borrowing potential with some helpful input from Stuart Poulson,
Head of Corporate trading at Nikko-Desjardins Asset Management and others in the
business.
1 Share the purchase
If a spouse or business partner earns more
than you it’s very possible a bank will give you a bigger mortgage than if you
were buying alone. Get the help of an independent mortgage broker to determine
the protocols of a bank or building society on a case by case basis, as
organizations differ on how they handle this.
2 Lower your debt
Chambers says, “If you get your credit card
or overdraft debt down to a certain level, lenders will naturally look at you
as someone who would be able to cope well with a sizeable mortgage and
therefore, lend you a larger amount. Debt is always taken into account, so
adjusting that factor can work wonders.”
3 Utilize alternative credit
In some circumstances you can use other
serviceable debts to plug the gap in a mortgage agreement. You need to be very
careful with bridging loans as per point number 2 above though. “If a bank
feels you are overstretched they are less likely to make a deal with you. Keep
a close eye on interest rates when using this method,” says Chambers.
4 Consider using a guarantor
Although there are fewer banks offering
guarantor type arrangements it’s still worth asking as some companies will be
more willing to lend knowing that there is an extra party willing to pay back
the loan if you find yourself in trouble. “It really depends on the specifics
in each case,” says David Hollingworth of London & Country mortgage brokers. “It
never hurts to discuss with the bank if the option is available.”
