How long does a mortgage application take?

Agreement in Principle 

Before you get started with your mortgage application, you can apply for a mortgage “Agreement in Principle”. This is a speedy way of getting a good idea of the amount a lender may lend to you based on some basic information. 

You can usually obtain this on the same day that you provide some information on your current income. They will also run a credit check on you (and anyone buying with you). It isn’t a guarantee that you get a mortgage approved for that amount, but it is a good place to start, especially if you want to get home hunting! 

Mortgage Application 

The mortgage application to secure yourself a formal mortgage offer can take a bit longer. There is no set rule, but it can take between 2-6 weeks from starting a mortgage application to receiving a mortgage offer. 

It’s the reason why we advise you to look at your finances before you embark on your home buying journey. For our simple 12-step guide to buying your first home, click here. 

When should I apply for a mortgage Agreement in Principle? 

If you need additional finance to fund your purchase – this is most of us to be honest! – we recommend that you speak to your lender or mortgage advisor as a first port of call. It is always best to have a good idea of what you can afford before you start viewing homes on the market. A general rule of thumb is around four times your (collective) earnings plus your deposit which should be 20% – 25% of the total property value. There are also 5% and 10% deposit schemes as part of the government initiative to help more people get on the ladder – book a call with our team about this if you’re interested in applying for one. 

Not only will this mean you don’t waste time searching for properties outside your budget, but it will also help to improve your profile as a proceed able buyer (someone who can legitimately afford to buy the property) when submitting an offer. Estate agents and sellers will assess your buying capability before accepting an offer. Having your agreement in principle already in place at the time of submitting an offer will help the seller have more confidence that you are able to proceed with the purchase quickly and efficiently. 

When should I start the mortgage application process?

We recommend that you start the mortgage application process as soon as you have agreed a price for the home you wish to buy. There are a vast number of checks that the lender needs to go through to formally agree to lend and the sooner you start the application process, the sooner you can proceed to the next steps of buying the property.  

Note: if buying through Help to Buy, or a new build property, the process is slightly different. Please click here for our Help to Buy guide and here for our new homes buying guide (coming).

Why does the mortgage application process take so long? 

The lender needs to carry out multiple checks on you as an individual but also on the property you have chosen to buy and this process can take several weeks. 

Here are some of the things that the bank may require. It is always best practice to have all of your information ready so that the application process is as fast as possible. 

• 3 months of pay slips, bank statements, self-assessment returns (if self-employed)
• Details of your outgoings, including childcare costs
• Proof of ID and address
• Proof of deposit 
• Details of your solicitor 

Once you have sent these over, the lender will also look to carry out a mortgage valuation survey of the property. This process can also take over a week whilst you wait for the surveyor to visit the property (if required) and to report back to the lender. This basically tells them that the property they’re lending you the money for is worth the amount you’re paying. 

What next? 

If the bank is happy with the outcome of the valuation survey, along with your personal finances, they will offer you a mortgage. 

How can I speed up the mortgage application process?

It is often a good idea to seek the advice of a mortgage broker to enable a faster application process. A mortgage broker is always familiar with the best mortgage products on the market and understands the specific criteria that a lender looks for in an application. This will save you time doing your own research into which products on the market are most competitive, but also that are available to you and your personal situation. 

You can also speed up the process by having all the above documents to hand ahead of beginning the process. It can take time collating previous P60s from employers for example. 

Another tip is to ensure good communication throughout the process and to make sure your solicitors, lender, and estate agent, are all in touch. This is always good practice and will ensure your lender is able to book in a valuation survey promptly so as not to hold up the process. 

At mypropertyadvice.com, we can help you through any part of this process. If you need some initial advice or need to overcome an issue along the way, we are here to help. 

Back to Basics – How does a mortgage work?

The money you borrow to buy a home is called the capital. You borrow this from a lender and in turn, the lender then charges you interest on this loan until it is repaid.

There are two main types of mortgages: 

Repayment mortgage

With a repayment mortgage, you pay the interest and part of the capital off each month. The term to pay back the loan in full is usually 25 years, at which point, you will own your home outright. 

Interest-only mortgage

With an interest-only mortgage, you only pay the interest on the loan meaning that your payments each month are smaller than if you were paying off capital as well. 

There are several reasons why you might opt for an interest-only mortgage, but you will not own your home at the end of the term unless you repay the original loan amount at the end of this period. Often you will then use savings or other assets you own to pay off the total loan amount at the end of your mortgage term.

When applying for an interest-only mortgage, the lender will often want to understand your plan for how you will pay off the loan at the end of the term. They may want to see more than just your expectation that the value of the property will increase overtime, enabling you to sell, and pay back the loan out of the proceeds. 

To speak to us about which type of mortgage is right for you, please get in touch. 

Mortgages and Interest Rates 

Often referred to as just “Mortgage Rates”, these are important in selecting your mortgage product and can impact how much you will pay the lender to borrow the amount you need. The interest rates will determine what your monthly repayments will be and is something that you want to keep as low as possible when searching for a mortgage that works for you. 

Why are mortgage rates important? 

The mortgage interest rate will determine how expensive it is to borrow the money you need to buy your home. Put simply, the higher the interest rate, the higher your monthly repayments.  Interest rates are always calculated as a percentage of the balance of the capital you have borrowed.

For repayment mortgages, you will pay a set amount of the capital back each month, as well as the interest on top of that. 

For interest-only mortgages, you only pay the interest each month and none of the capital. 

It is always a good idea to use comparison websites or speak to a broker to compare mortgage interest rates. A mortgage broker may be able to find some lower rate mortgage products that are not visible with high street lenders. To speak to a specialist, get in touch. 

Fixed rate or Variable rate? 

Within the above two types of mortgages of Repayment and Interest-only, there are also two main different types of loan structures. 

These are mortgages that come with fixed rates, or mortgages that come with variable interest rates. 

Mortgages with fixed interest rates

With a fixed-rate mortgage, your repayments will be the same for a selected period of time. This is typically 2 to 5 years.

Regardless of what interest rates are doing in the wider market, you lock in a rate at the point of arranging the mortgage and that rate stays the same for the 2-5 year period. 

You would then look to re-mortgage to another product at the end of this period. 

Mortgages with variable interest rates

If you have a variable rate mortgage, the rate you pay could move up or down, in line with the Bank of England base rate.

There are also several types of variable rate mortgages. 

Is a fixed rate or variable rate right for me? 

There are a number of factors that might determine your decision when selecting a fixed or variable rate. 

One factor that may influence your decision, may be your expectation of what interest rates may do over time. For example, if you think that the Bank of England may raise interest rates in the near future, then you might lock in a fixed rate for 5 years to mitigate yourself from higher mortgage payments for as long as possible. Alternatively, if you think that the interest rates will fall further, you might opt for a variable rate so that your repayments go down alongside the interest rates. 

There are multiple other factors that may determine which mortgage type and loan structure is right for you. In order to get the best product that is right for your personal situation, we are here to help to discuss further. 

Which mortgages have the lowest rates? 

The above types of mortgages can all have an impact on the rate you are offered by your lender. This is generally based on how risky the lender perceives each type of mortgage to be. For example, you usually must pay a higher rate on a fixed rate mortgage than you do on a variable rate. This is because the lender is subject to any potential interest rate changes during your term and the cost of servicing the loan for you may go up for them if interest rates go up, even though you have fixed the amount you pay each month. They perceive there to be more risk involved in this instance and so offer lower rates on variable products. 

Put simply, the interest rates on fixed rate mortgages will be higher than those available on variable deals but at least you know exactly how much you will repay each month for the mortgage term.  

How do I get the best mortgage interest rate? 

The right deal for you will depend on your personal circumstances and what you want from a mortgage. The rates you will be able to achieve will also be based on a number of factors. 

Here is a short list of how you could increase your chances of getting the best mortgage interest rates:  

• Enhance your credit score – lenders will check your credit history when deciding if they will lend to you. They will want to know that you are good at repaying debt and so the better your credit score, the better chances you will be offered a mortgage and at the most competitive rates. 

• Save more – lenders are more comfortable with lending to those with higher deposits and therefore lower loan to value ratios (or LTV). Using a small deposit may mean that you are unable to tap into the very best rates on the market. So if you can, it might be worth saving more towards this initial deposit. If this is simply too difficult, then there are also a number of great government schemes to help those with smaller deposits. Click here to find out more. 

• Compare the market – There are loads of different lenders in the way of high street banks and smaller building societies who all offer mortgages. Each will have a range of different mortgage products on offer, and so it is well worth shopping around for the best deal on offer at any one time. 

• Use a mortgage broker – A mortgage broker is usually well versed in scanning the entire market for the very best mortgage deals that are specifically available to you based on your circumstances. Not only are mortgage brokers familiar with the different products on the market, but they have access to mortgage deals which are not available to you as a retail customer. So although there may be a small arrangement fee involved when using a broker, the saving they could achieve for you could be significant.  

If you have any more questions about what your specific situation would mean for your mortgage prospects, do get in touch and one  of our expert advisors can help you get started.