How a mortgage lender assesses you during your mortgage interview
As part of getting a mortgage, you’ll need to have a detailed interview. But don’t worry. This will help establish what you can afford without stretching yourself. After all, buying a property is one of the biggest purchases you’ll ever make.
Why do you need a mortgage interview?
In recent years the rules governing getting a mortgage have changed. At their core, they aim to make lenders more responsible about their lending – and make sure that customers can afford what they’re borrowing. Not just now, but in the future too, especially if interest rates go up or their circumstances change.
What to expect
Typically you will have your interview before submitting your mortgage application. Your interview might take place in one go, or over a few shorter sessions to collect all the necessary information. It can also be done face-to-face or over the phone and usually lasts between 1 and 3 hours.
Don’t be put off by the level of detail the mortgage adviser or lender’s representative will want to go into. Think of it as an advice session where the mortgage adviser or lender gets to know you. Ultimately the aim is to help you choose the most appropriate mortgage for your current needs and circumstances – whilst taking into account your future plans.
At the end of your session, you should have a clearer sense of your finances and feel confident that you could comfortably afford your mortgage.
What to bring
Make sure you have to hand your:
- Last three payslips
- Last three months’ bank statements
You will also need to show proof of any bonuses or commission you might have received. Or if you’re self-employed, you will need to bring the last 2 to 3 years of signed accounts or tax returns, and your Self Assessment tax return.
You’ll also need to verify your identity and address. To do this you’ll need:
- Valid photo ID, such as a passport or photocard driving licence
- A council tax statement, current bank statements, credit/debit card statements or other utility bills (from the last 3 months).
If you’ve gone paperless on your bank statements, it’s worth checking as bringing a print-out from the internet isn’t always acceptable.
What’s more, if you’ve been at your current address for under 3 years, lenders will want your previous address or addresses too.
Know the answers
Part of the interview’s purpose is to establish that you’ll be a responsible borrower and to determine how much money you’ll have available after all your commitments are taken care of – and how much you could be comfortable spending on a mortgage. In order to do this, you may be asked about your monthly expenditure in the areas below. Keep in mind, that some of the documents you bring along to the interview can be used when you send your application. These will be returned to you.
This is what you regularly spend on the things you cannot do without, such as food, gas and electricity and other heating costs, water bills, telephone, essential travel costs (such as travel to work or school runs), council tax, buildings insurance (it’s a condition of your mortgage that the building must be insured), ground rent and service charges (for leasehold properties), and household cleaning and laundry.
Basic quality of living costs
This is what you need to spend on occasional essentials, with some allowance for leisure costs, including clothes, household goods (such as furniture and appliances) and repairs, personal goods such as toiletries, basic leisure costs including non-essential transport, TV licence, and childcare.
Repayments and other commitments
This covers other payments you know you will have to make, including debts you are paying off, like credit card bills, loans or hire purchase payments, and child maintenance and alimony payments.
The exact details you are asked for will vary between lenders, but you should expect to discuss your regular spending in all these areas.
Your credit history is an important part of the process. This helps the lender decide, based on your previous borrowing activity, whether you will be able to repay what you owe.
During your interview, you’ll be asked if you’ve ever had a County Court Judgment or any other Court Order for non-payment of a debt. If you had, this could be an issue for your application. Speak to your mortgage adviser or the lender’s representative about what to do.
Also, you’ll be asked if you’ve ever been in arrears for a mortgage, rent, loan, credit card or store card, had a property repossessed, been refused a mortgage or credit. Or if you’ve ever been declared bankrupt or insolvent.
Origin of deposit
Sometimes lenders will want to know where your deposit is coming from.
If you’ve saved up for it, bring a bank statement from your savings account. Or if you are getting help from your parents or anyone else, you will need a letter from them stating whether the money is a gift or a loan.
Some of the other questions you might be asked can feel a bit personal. But keep in mind that the lender or mortgage adviser is simply trying to understand your current situation and how future plans might impact what you can afford.
After all, part of the interview’s purpose to make sure you won’t be stretched now or further down the line. So you could be asked some of the following:
- Do you expect your income to go down?
- Do you expect your regular expenditure to increase?
- Do you have any children or other dependants?
- Do you have any plans to leave your job, start a business or become self-employed?
- Have you ever taken out a payday loan?
- Do you expect any other changes to your personal circumstances?
Normally lenders will only lend up to retirement age, which is often but not always between 60 and 68 years old. If you expect to have an income in your retirement, you may be able to take out a mortgage beyond that age. If this is the case, you’ll also be asked about your pension arrangements.