A nationwide study conducted in the UK in 2017 has shown that around 63% of homeowners in the country have mortgages. If anything, this astonishing number is an indicator of the dynamic role mortgage loans play in the economy of the UK and the rest of the world. However, this doesn’t automatically reflect the wealth of the citizens. In fact, taking out a mortgage loan has very little to do with the borrower’s financial standing or whether or not they can afford to purchase a house from their own money. It’s rather a matter of financial efficiency. When given the option to pay a down payment upfront and divide the rest over periodic installments at a reasonable interest rate to buy your dream house, why would you choose to pay in hard cash? Although mortgage loans are very popular, only a few people really understand how they work. If you are contemplating taking out a mortgage but are worried that you don’t have a solid understanding of the process, you’ve come to the right place.
Continue reading to learn more about the complete timeline of the mortgage process.
Decide What Kind of Property you Want
There isn’t a standard time limit for this step. Generally speaking, deciding what kind of property you want is the one that takes the longest out of the mortgage process because it’ll be the base that will determine all the other variables. The market is overly supplied with properties of all kinds that have the potential to become your ‘forever home’. However, a good place to start is to decide early on your likes and dislikes in houses. Deciding is when you exclude houses that aren’t big enough for your growing family or the ones in neighborhoods that you don’t find worth moving to. If you go into the house-hunting phase with no plan, you’ll definitely feel overwhelmed by day two of your search unnecessarily dragging the entire process. Instead, approach the mission with a comprehensive checklist to move efficiently onto the following step.
Understand Your Target Property’s Budget
“How much should you borrow?” is the million-dollar question when you’re considering a mortgage loan. After narrowing down your options, it’s time to talk about money. Learn about the asking price for each of the properties on your list so you can narrow down your options even further and make an actual offer. For this step, you will need to use a trusted mortgage calculator to work out the numbers. You don’t need to dedicate much time to this step as the calculation part is pretty straightforward. The data you’ll need to estimate the duration of your mortgage include:
- Home price
- The deposit you’re planning to pay
- The interest rate you’re being offered by the lender
- The term/duration of the mortgage
Applying for the Mortgage
Based on the information you gather from the previous step, it’s time to consider the available mortgage offers in the local market. It’s not enough to ask around and do a quick online search. Gaining a mortgage loan is a pretty big deal! So, you should make sure you gather all the information you need to make an educated decision about the lender you’re going to select. A good strategy is to apply with multiple lenders to compare the offers and take your pick. These lenders will ask you to prepare the following:
- Identification document (National ID or passport)
- Recent proof of address (dated no longer than 3 months back)
- Proof of salary (payslips, tax return statements, etc.)
- Recent bank statement (for the lender to understand your spending habits and assess the associated risk)
- Proof that the deposit has been made including information about the source of the money
Usually, it takes loan-seekers around two weeks after having fulfilled the required paperwork until receiving an official mortgage offer.
Make it Legal
To handle the intricate legal details of acquiring a mortgage loan, you’ll need to hire a professional conveyancer. A conveyancer is responsible to follow up with local authorities to make sure your application for transfer of ownership goes through smoothly otherwise, they’re also responsible to find out what is causing the delay. In the best-case scenario, if your application is all clear, this step should be done within 6 weeks. However, when the government offices are sometimes swamped with many applications, yours might take a few months before it’s concluded.
Conduct a Property Survey
A property survey acts as further proof for the lender to verify that the property in question is in excellent condition and won’t be a risky liability. With the help of professional surveyors, you should be able to get the survey results within a couple of weeks. Although important, this step is rather simple and doesn’t require much back and forth with the surveyors because they follow a standard format of the questions. In some parts of the UK for example, you’ll be asked to submit extra reports with the survey that includes more details about the property like an energy efficiency certificate.
Closing the Deal
After applying for the mortgage, you can make an official offer on the property using the mortgage in principle document. This way, it would encourage the seller to accept your offer and move on to the exchange of contracts and agree on a completion date which usually happens between 1-4 weeks. This is the final step of the process where you take the contract and present it to your lender. The lender will then process your mortgage based on all the documents you submitted. However, in some cases, if you’re involved in a property chain where the sellers themselves are acting as buyers to another property, this might put off your completion date a few more weeks.
As you can see, the mortgage process may take some time. If all goes smoothly, you should be able to get it done within 8-10 months. However, if you want a more realistic timeline, give it at least a year because as you have read above, there are many variables that you don’t have control over, so it’s always better to give yourself some wiggle room to devise a more accurate property-purchase plan.