“Hi Jenni. I’ve been saving for my own place for two years and have managed to save up a £20,000 deposit so far. At the start of the year I was made redundant from my job in marketing and decided to use the opportunity to start freelancing. Things are going well so far and on really good months I can make as much as £3,000 a month. But I have bad months too and the worst month brought in just £1,000. I’m living with my grandmother at the moment and she’s letting me live rent-free in exchange for doing things around the house and shopping for her, so I can live quite cheaply and save money each month. Anyway, I guess my point is, will I be able to get a mortgage based on my current circumstances? I spend at least an hour a day exploring my dream homes on Rightmove and Zoopla, and I’m thinking of buying one for around £200,000 in Manchester. I’m just so excited to have my own place and I’m fed up of waiting!”
Tara, 28, Manchester
First of all, well done on saving £20,000 so far and for starting your own business! It sounds like you’re doing amazing.
Now to answer your question. I’m going to be honest. If you were to walk into the average high street bank today and apply for a mortgage, I suspect your chances of getting approved would be slim. I say this because lenders want to see evidence that you can comfortably afford to repay their loan each month without getting into financial difficulties.
I know you have some really good months and it sounds like you make the most of these months by saving as much as you can, but lenders are most likely to focus on your bad months rather than the good ones. They’ll look at your accounts, self-assessment tax returns, and bank statements and ask themselves “will she be able to make her repayments on the months when she’s only bringing in £1,000?” They’ll also take into account that you’ve only been freelancing for a few months. Most lenders want to see at least two years of accounts and tax returns.
You might think to yourself “well I may as well just apply for a mortgage anyway and see what happens” but applying for a mortgage and getting rejected can have an impact on your credit score and reduce your chances of getting approved the second time around.
If you really do want to give it a go now, I don’t think there’s any harm in contacting a free and independent mortgage broker and asking them for their expert advice. Don’t go directly to a lender. Think of a mortgage broker as a sort of ‘save space’ where you can talk about your finances in great detail and gain an expert’s opinion. A good mortgage broker will look at your financial situation and use their specialist knowledge of all the different lenders to determine how likely it is that your application will be approved. If they think your chances are really slim, they’ll tell you. They don’t want to waste their time fighting for a mortgage that you’re probably not going to get.
However, as I said, I do think your chances are slim right now. If I was in your situation, what I think I would do is wait it out a little longer. I’d carry on making the most of living with my grandmother and I’d embrace the opportunity to pour as much time and energy into my business. I’d also carry on working hard and saving as much as possible so I could grow a bigger deposit.
The £20,000 you’ve saved so far equates to a 10% deposit on a £200,000 house. However, if you want to increase your chances of getting a mortgage and keep your repayments as low as possible, you’d be wise to save more than this if you can.
If you decide to contact a mortgage broker, I’d strongly recommend Habito. I used them when applying for my mortgage and they were a huge help in finding the most affordable deal for me. If you use this link when creating your Habito account and then go on to get your application approved, you and I will each earn £100 thanks to Habito’s referral scheme.
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