Mortgage: Britons warned ‘what not to do’ as agreements could be put in jeopardy

Martin Lewis gives advice on paying mortgage with savings

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A mortgage is a major financial commitment, and as such, lenders will be looking into a person’s stability and whether they can keep up with payments. However, many people are unaware of the small mistakes they could be making within their financial lives which may impact an application. Thankfully, Karina Hutchins, head of Home by OpenMoney, has shared top tips to ensure a person’s application for a mortgage is squeaky clean. 

One of the most important points for individuals to consider is the cost of childcare, which can easily rack up. 

Described as “extortionate” by Ms Hutchins, the expert recommended looking at this matter carefully when hoping to secure a mortgage.

She advised taking advantage of Government or workplace schemes to help get discounts on childcare in order to not place a dent in a person’s income.

Indeed, with the pandemic meaning many people can now work from home, this could also be a solution to a potentially pocket-draining endeavour. 

Another aspect of life which can also impact a person’s finances is Buy Now Pay Later (BNPL) schemes, which are increasing in popularity.

While these can be helpful in spreading costs, many people do not actually consider this as debt, and then get a nasty surprise when it comes to dealing with a mortgage.

Advice can differ according to lenders, Ms Hutchins said, but there have been instances where buyers have had applications rejected due to these schemes – which show up on bank statements.

She added: “It can give the impression that you are ‘living beyond your means’, which can be a worry for any lender.”

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But an equally important point to consider is the idea of credit cards as opposed to debit cards – which could make a huge difference on how someone is perceived.

Ms Hutchins continued: “Surprisingly, for many lenders it is better to have debt on a credit card and meet the minimum payment requirements each month than live in your overdraft.

“Being in your overdraft could mean your application is declined if it’s more than your salary and you’re constantly ‘in the red’.

“However, if you have the same amount on a credit card and you’re meeting the minimum payments, most lenders are okay with this. 

“For larger payments, it’s worth bearing this in mind, and putting them on your credit card instead.”

While the idea of credit and payments is vital, having an understanding of one’s bank account history can also help.

Often people switch bank accounts in order to benefit from the best deals, or simply due to their desire to find a new provider.

However, it is the timing of this which could be impactful for those hoping to secure a mortgage.

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Ms Hutchins concluded: “Don’t switch between banks three to six months before applying for a mortgage.

“Although banks often entice us with incentives and cash bonuses, think through this logistically prior to changing.

“Lenders often want three months worth of consecutive bank statements, which could prove a nightmare if you haven’t long been with your bank.”

Once these ideas are considered together, Britons should be well on their way to securing a mortgage.

However, as this is a big step, individuals are encouraged to speak to a mortgage broker.

These experts can often offer tailored advice to suit a person’s circumstances and help them on their journey. 

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