Aspiring homebuyers can check how likely they're to become approved for any mortgage without harming their credit ratings, with new tools launched by Experian and Compare the Market.
The credit reference agency and comparison site, which launched their new initiatives within weeks of one other, will allow individuals to execute a 'soft search' to figure out where they stand before they apply for a mortgage or embark on a house hunt.
Which? explains the way the new mortgage eligibility tools work, why they're important and just what that you can do to improve your mortgage chances.
How does Experian's mortgage eligibility tool work?
Experian's mortgage eligibility checker takes the data you complete about your household income, address history and financial budget and compares this to lender's criteria and credit reference information held about you.
The tool can check your mortgage eligibility with seven lenders including Aldermore, Barclays, The Co-operative Bank, Coventry Building Society, The household Building Society, Leeds Building Society and West Bromwich Building Society.
It will display the mortgages in which you have the best chance of being accepted, as well as deals that it isn't in a position to provide these details. Helpfully, it will likewise let you know if your lender would not be able to lend the amount requested.
The service lists the products available from each lenders to assist your comparison. But keep in mind the eligibility rating is supposed to show your probability of being accepted by the lender, instead of for the specific product.
The Experian tool enables you to search fixed, variable and tracker rates however, you won't be able to compare interest-only, buy-to-let or lifetime mortgages – or those targeted at government schemes for example Assistance to Buy.
Your check is going to be recorded like a 'soft search' in your credit history, only the thing is this instead of lenders. The check won't affect your credit rating and you can get a good idea of what your location is and what you need to do to enhance your mortgage chances.
How does the Compare the Market mortgage eligibility tool work?
The Compare the Market Mortgage Eligibility Checker works similarly. It asks for several personal details to calculate how much you'll be able to gain access to and whether you’re a great fit for a range of lenders.
You'll have to input information like your household income, address history and financial commitments. Compare the marketplace will match this data using the affordability and eligibility criteria of lenders on its panel.
The tool can look at your eligibility with eight lenders such as the Family Building Society, Leeds Building Society, Platform, Skipton Building Society, Accord Mortgages, Coventry Building Society, West Bromwich Building Society and Yorkshire Building Society.
Rather than providing a rating and a listing of items like Experian, Compare the Market prepares a summary of the lenders you may be able to borrow with and also the selection of borrowing you can achieve.
Again this will only be a 'soft search', so lenders won't see it in your credit report also it won’t impact on your credit rating.
What you have to be careful for
Both eligibility tools may be used by first-time buyers, home movers or those seeking to remortgage for any single or joint application, but they aren't currently established to help those looking for a buy-to-let deal.
The eligibility guidance provided by Experian and Compare the marketplace is just readily available for a selection of lenders, so there might be other providers in the market that might be prone to accept the application.
Keep in mind the tools won't look at whether the mortgage is suitable for you personally as well as your financial needs. So as the eligibility check is advantageous, it should simply be one of steps in your research on mortgage deals.
What's the purpose of these tools?
Research from Compare the Market suggests most are too pessimistic regarding their mortgage borrowing options, which can be putting people off pursuing their home-owning dream.
It found nearly 1 / 3 (30%) of UK adults don't think they're permitted to borrow money via a mortgage.
When inspired to predict how much cash they could borrow via a mortgage, over half (58%) weren't confident in providing a solution. Those who did weren't optimistic, with 16% thinking they couldn't borrow more than lb50,000.
With average house prices estimated at lb225,621, this suggests a real lack of confidence about buying a home. Just 12% in the survey said they might see themselves securing a home loan big enough to cover a house at the average national price.
However, Compare the Market found through its Mortgage Eligibility Checker that 45% of customers that carry out a search are able to borrow the things they requested or maybe more, while 28% would end up with saving money light for a lower borrowing amount.
Just 16% of consumers weren't eligible or otherwise in a position to afford a mortgage and 6% was without an adequate credit history for that tool to be able to check. Additionally, 20% of consumers that used the tool wouldn't be able to afford or be eligible to remortgage.
Should you utilize a mortgage eligibility tool?
Applying for a mortgage can be a daunting experience, even if you have done it before.
It's hard to know if you'll be eligible for an offer and if a lender is willing to lend you what you need to borrow.
A soft search is a great way to find out what you can borrow and if you are apt to be accepted for a mortgage, but so far you'd have needed to deal with lenders individually.
So, the brand new selection of mortgage eligibility tools might help help you save time and give you a snapshot of where you stand with certain lenders.
It’s also a great way to avoid having to go via a hard credit assessment.
A hard credit search leaves a footprint on your credit report which other lenders can easily see. If you have diet program these, it can decrease your score and lower your chances of getting credit later on.
How to improve your mortgage chances
If the mortgage eligibility tools show that you don’t possess a good possibility of being accepted, it's a good chance to try enhance your financial situation. Here are some tips you can try:
Save a larger deposit – you'll require a deposit with a minimum of 5% of a property's value to get a mortgage. The more you save, the higher the product range you are able to select from. Lenders tend to like borrowers with a bigger deposit as it means the offer is less risky on their behalf.
Check your credit report for errors – you'll need to pass a credit check when you obtain a mortgage, which means you should look at your credit reports with Experian, TransUnion (formerly Callcredit) and Equifax don’t contain any errors.
Boost your credit rating – the higher your credit score, the better your chances of being qualified for any mortgage. Simple steps like registering around the electoral roll can improve your rating. Find out more in our guide regarding how to improve your credit rating.
Consider a broker – a home loan broker has expert knowledge of the mortgage market and can help advise you around the cheapest price for the situation.