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Are you the 'ideal' borrower?

All borrowers should be benefiting from the current low interest rates. However, if you are what banks see as an 'ideal' borrower, you should have extra bargaining power – and this means significant savings for you in the long term.

There are a few things banks look at when considering your mortgage and the rate you will be offered. The higher you score, the more power you should have when negotiating rates. You can achieve a saving of up to 0.9 percent depending on how much you borrow.

Here are the main things banks look at:

Big deposit = big tick

The more cash you put into an application, the lower the risk is from the bank's point of view. The key is to ensure the overall loan value to total property value ratio is less than 80%, so the bank sees the loan as 'less risky'. It also helps to have minimal debt elsewhere.

Develop a savings habit

Banks like to know you can stick to a budget and accumulate savings; it's a good sign to them that you won't encounter any issues making your mortgage repayments.

Don't overreach

Understanding your position and what you can afford is important. If you try to climb the property ladder several rungs at a time, you might be biting off more than you can chew.

If the bank thinks you won't be able to afford your repayments, they won't lend you the money. So, if you want to maintain a particular level of lifestyle spending, you may have to lower your sights in terms of the property values you're looking at.

Pay your bills on time

If you're bad at paying your bills on time, the bank might think you'll be bad at repaying them too. Pay promptly and ensure good conduct on all your accounts.

Avoid defaults

If you pay your bills on time this shouldn't be an issue. But, if you do get a default, pay it as soon as possible. Lenders generally won't look at an applicant with open defaults. If the default has been wrongly put on your file, take the time and effort to get it removed.

It also helps to be upfront with the lender about past defaults. Banks will pay close attention to your accounts for the last three months, so if you are looking at taking out a new loan start preparing your finances in advance.

Discussing your options with a mortgage adviser can help you better understand your position, your capabilities and options. Advisers do the leg work for you and can talk to several lenders to get you the best possible deal for your particular circumstances.


Image courtesy of suphakit73 / Freedigitalphotos.net