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Article > Tips for Investors on the New Mortgage Rules



Article kindly supplied by

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The release of the Mortgage Market Review (MMR) sent ripples through the property market and warned investors and buyers of how they should keep an extra close eye on their finances to ensure affordability. The rules mark the biggest change in mortgage lending for the last decade and crack-down on the lenient procedures that caused excessive lending in the housing market boom before the recession. Although the changes are sensible, it means that the process has become more vigorous and the availability of mortgages may be scarcer.

Whether you’re looking to invest in property to move in to, buy to let or sell on, here are three tips to bear in mind before you approach a lender.


1. Provide Evidence

You can bet that lenders and underwriters will be teasing your financial records with a fine-toothed comb. Be sure you have collated and gathered the right evidence a number of months before your appointment. “There’s a lot of financial jargon that is difficult to understand” said homebuyer Claire Bhandhukravi when interviewed by the BBC, “It’s difficult enough getting the mortgage then to go through all that paperwork is quite a daunting procedure.” In this way, it is best to be ready and have an idea of what to expect. You’ll need to provide evidence of your earnings with payslips from the last three months, your annual P60 form, audited accounts and bank statements. Other documentation may also be requested such as pension and investment statements, depending on the particular lender’s opinion and method.

 

2. Keep Tabs on Spending

Be sure to be clever with your spending and get into good habits before you take on a mortgage or property. The Financial Conduct Authority (FCA) listed that items that applicants must provide spending costs on which included food, household bills, travel and official records of council tax, insurance and service charges for leasehold apartments.


The lender can now also use your discretionary spending habits on personal goods to calculate your debt-to-income ratio and decide whether you could afford to keep up repayments should interest rates rise. To calculate your own debt-to-income ratio, just divide the sum of all your monthly outgoings to your gross income.


3. Consider Renting

The renting market will undoubtedly become more popular as many people struggle to qualify for mortgage loans and even sell their houses on to potential buyers. If you’re looking to buy a new house, it is worth renting for a period of time to save enough money for a deposit and get your financial records to the best that they can be. Property investors on the other hand may be struggling to sell their house on for a profitable amount so may want to consider buy to let and become a landlord or hand the property over to a trusted letting agent.

Overall the new rules mean that people are forced to be more careful and clever with their money, which is not all together a bad thing. If you’re an investor, it is wise to consult your own trusted accountant who can manage your budgets and provide the best possible evidence to present to the lender for a stress-free and successful property investment career.

 

 

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