I’m a mortgage expert – here are the tricks to get a loan as lenders make it harder to get approved

HOMEBUYERS could find it tougher to get a mortgage as the cost of living soars, but insider tricks can help you get the loan you want.

Greg Cunnington from mortgage broker LDN Finance says rising energy bills, council tax and travel costs means lenders are now slashing the amount they will let you borrow.

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Banks use official data on households’ outgoings to work out how much an aspiring homebuyer can afford to borrow and repay.   

As living costs rise, banks typically lower the amount they will lend.

Greg says: “If an energy bill rises from £100 to £300, lenders know there is less money to play around with each month. This has a knock-on effect on how much people can borrow.”

In a double whammy, interest rates are also going up, which increases repayment costs to further curb mortgage sizes for borrowers.

But Greg says insider tricks can help you borrow more to make sure you get the home you want.

Extend your mortgage term

When you take out a mortgage, you agree to have it for a certain period of time.

Typically this is around 25 years, but it can be longer or shorter (and you can change it later down the line)

So one way homebuyers can make monthly payments more affordable is by opting for a longer-mortgage term, according to Greg.

He says: “The longer the term, the lower the monthly payment. We’re seeing a lot of clients asking us to proceed on a maximum term basis. It really helps first-time buyers.

“You need to be doing a job where you don’t have a legal requirement to retire early, but anyone office-based shouldn’t have a problem.”

Many lenders will allow loans to run up to the age of 75, with some offering terms as long as 40 years.

But borrowers need to be aware that increasing the term means you’ll pay more interest on the mortgage in the long run.

If you had a £150,000 mortgage at 3.5% for 25 years, your monthly repayments would be £751. And over the term of the mortgage, factoring in interest payments, you’d repay £225,281.

If you had the same mortgage on a 40 year term, your monthly repayments would fall to £581, but the total amount you’d repay jumps to £278.921.

Fix for longer

Choosing a longer term fixed-rate is another way of bumping up loan sizes if you’re comfortable to be tied in.

Greg says: “There are a couple of lenders where you can borrow more if you take a fixed rate of five years or longer.

“In the current environment, people also want to lock in longer as they’re worried about rate rises – it’s a win win.”

Having a fixed-rate mortgage is great for anyone who wants to know exactly how much they’ll be repaying each month.

They also protect you from interest rate rises. If you’re on a variable or tracker mortgage, then each time the Bank of England hikes interest rates, your monthly repayments are likely to go up too.

But those on fixed-rate mortgages have locked in their rate for a set period, so are protected from these hikes.

Consider an interest-only mortgage

Buyers who want to borrow more and keep repayments low could also find interest-only mortgages are an option if they have a deposit or equity of at least 25%, according to Greg.

On these deals, borrowers only pay back the interest on the mortgage each month so bills are lower.

Greg says: “There are lenders that allow mortgages to be on an interest-only basis for a period while borrowers are feeling the pinch, as long as they have a suitable repayment strategy in place.”

But you’ll need to have a plan in place for how you’ll pay back the rest of the loan in the future.

These mortgages are typically only suitable for people who have a lot of money in savings or investments, so can afford to pay off the balance of their loan.

Shop around

Different mortgage providers have different lending criteria, so some might let you borrow more than others.

That means it’s important to look around the entire market to maximise what you can get.

Greg says: “Different lenders specialise in different client scenarios. You want to make sure you’re getting the borrowing figures from every lender because it can be so vastly different.”

For example, aspiring buyers who work overtime, receive bonuses or get commission could find lenders take just 50% of this additional income into account, but others will consider all of it.

A good mortgage broker can help borrowers compare lenders to find the biggest loan based on their particular circumstances. 

Greg says: “Brokers have access to the decision makers at the lenders, they can get things agreed that clients won’t be able to do themselves.”

Advisers also have relationships with little-known lenders that will accept applicants when big name banks won’t.    

Greg says: “There are specialist lenders who can assess clients on their individual affordability and don’t work off statistics, this is a really useful part of the market for those who are not getting what they want from the high street names.”

Tidy up your finances

Getting your finances in shape could help you borrow more too.

Home hunters who are not in a rush to buy and can wait while they save a bigger deposit could find it is worth it to ultimately get a bigger mortgage.

Greg says: “The bigger a deposit you have, the lower interest rate you get – so lenders will lend more.”

At the same time, cleaning up any damaged credit scores is another check for people who anticipate buying in the coming couple of years.

Greg adds: “With a clean credit score, you can access lenders that will offer the most borrowing.”  

Each week, we speak to a first-time buyer as part of our My First Home series, including this person who quit the job she loved to save more money for a deposit.

Elsewhere, one property expert reveals the four simple steps to getting rid of mould for good.