Mortgage Application & (Proof of) Deposit

ichidan

Hi folks,

So I've got a mortgage application arranged later this wee. Just curious what I'm applying for exactly.

I mean am I applying to see how much they are willing to lend me? Based on a specified deposit amount?

e.g. Am I saying I want to buy a house X, with deposit Y (e.g. 10%) ?

Or am I just saying I want to buy house X. How much are you willing to loan? Then I decide what deposit to put down?

If its the former, and they're unhappy with deposit Y. Can I say I'll put down a different deposit e.g. 15%.

Also do I show proof of deposit before applying for the mortgage, or once they've given the mortgage?

Here's what I'm thinking, I want to buy a house, I can put down 10% deposit. But if possible, I'd rather put down 15% (due to the better rate), but I'd have to hunt around for some rich relatives/friends to gift me the extra 5% (which incidentally will give them a very good return on their 'investment' - By my calculations I'd save about 13k over 2 years - 550/month difference, just for an extra 25k gift i.e. property is around 500k).

They've not mentioned proof of deposit (going directly to them), although going via mortgage brokers they asked for proof of deposit.

Also: between exchange & completion (which could be 3-6 months time period), can you backtrack and say 'hey I'd actually like to put down a 15% deposit instead of a 10% deposit'. Or am I tied to the agreed upon deposit set at exchange. - or would it make more sense to just put down 10%, and then pay £25,000 extra on the first month to effectively raise the amount paid on the mortgage to around 15%. Would that do anything to the interest rate? As it would be fixed for a 2 year term.)

Thrugelmir

ichidan wrote: »

Just curious what I'm applying for exactly.

If you don't know then we won't either. You'll get an indication as how much you can borrow. Which will be a starting point for you.

ichidan

Thrugelmir wrote: »

If you don't know then we won't either. You'll get an indication as how much you can borrow. Which will be a starting point for you.

Really? I figured some people on here have already gone through the mortgage process, and others are mortgage brokers/advisors. Maybe I'll just ask the bank how it works.

Ok so it'll be just like the Agreement In Principle then. Except they'll want a few more bits of info?

But they won't need proof of deposit then to determine how much I can borrow. Because proof of deposit must be >= the amount of deposit required.

Reason why I ask, is that via the mortgage broker route. They were asking me to show proof of deposit now. While going directly to halifax they have not.

Nevermind, I'll figure it out myself.

amnblog

The broker is trying not to waste neither your time nor theirs.

Rollinghills

First you have to figure out how much you can borrow based on your income etc.
Then see what is the minimum deposit you will need for a given house.
If you have a bigger deposit then potentially you can get a better rate.

You normally apply for a specific mortgage, ie fixed / variable at a specific rate for a specific LTV.
You will have to show proof of deposit before your mortgage is approved (broker may want to see it earlier as you said).
Once you have a mortgage overpaying will reduce term and total interest not the interest rate unless you move to a different product.

I'm not a mortgage advisor though, it is just my understanding of how it works.

ichidan

Rollinghills wrote: »

Once you have a mortgage overpaying will reduce term and total interest not the interest rate unless you move to a different product.

I'm not a mortgage advisor though, it is just my understanding of how it works.

Yeah that's why I was fearing. And once you've locked in to the mortgage, you can't change for 2 years (or whatever the agreed term).

At which point are you locked in? Is it at exchange of contracts or at completion? Would be nice to say I'll put 10% deposit down. Then at completion, if I manage to amass 15% then put the extra 5% in.
Or vice versa (say 15%, and then if it completion you don't have 15% see if they will accept 10%)

Rollinghills

The moment you apply for the mortgage you are locked in, I don't know whether it is easy to move onto a different product once your application is in or once mortgage offer is issued - maybe your MA can answer that.

I would not overstate the deposit, if you have to reduce it later that would look very bad.

termhero

ichidan wrote: »

Yeah that's why I was fearing. And once you've locked in to the mortgage, you can't change for 2 years (or whatever the agreed term).

At which point are you locked in? Is it at exchange of contracts or at completion? Would be nice to say I'll put 10% deposit down. Then at completion, if I manage to amass 15% then put the extra 5% in.
Or vice versa (say 15%, and then if it completion you don't have 15% see if they will accept 10%)

Once you have an offer on a property accepted, you will need to start your buying/mortgage process. So it will be 'locked in' then what deposit you have. If by the time everything goes through (at least 6 weeks) you amass another 5%, you will either have to overpay (you will need to check if your mortgage allows this) or start the mortgage application again.

I'm not an expert either, but that is how I understand it to be and I wouldn't expect mortgage companies to appreciate being messed around in such a fashion (nor the property sellers).

ichidan

amnblog wrote: »

The broker is trying not to waste neither your time nor theirs.

Yeah well the broker wasted my time. I got a better deal going directly to Halifax, than going via the broker. By better deal I mean the broker said I could borrow 100k less than what I could borrow when going directly to Halifax. A difference between being able to borrow more than the value of the property to being able to borrow less than 90% of the value of the property.

The broker also wasted my time by asking to see proof of deposit of 13%, meaning I had to go hunt for gift money from my relatives. While going directly via Halifax, I've not had to provide such information and still got mortgage offer for 10% deposit. A percentage point makes a big difference on a 500k property. Not mention, feels good being able to buy a house without the help of anyone (apart from the bank) .

The broker also lied about the difference (or lack thereof) between a Halifax Mortgage Promise and a Halifax Agreement In Principle (AIP).

So, while my experience with a mortgage broker may have not been the norm. It does show that you have to be careful as they may not have your best interests at heart. At the end of the day, they're running a business, not a charity.

Anyway, happy to say I got my mortgage offer, and everything going well in preparation for my move. Thanks all that have provided advice. :T:T:T