In Depth

Mortgage tricks to avoid – and what to do instead

New rules have made mortgages harder to come by, but trying to trick the banks could backfire

One year on from the implementation of the Mortgage Market Review and would-be homebuyers are finding it difficult to balance stringent affordability checks with the amount of money they need to borrow to buy a house when prices are soaring.

One big problem facing many mortgage applicants is the strict affordability checks introduced by lenders. In the past banks would simply look at your annual wage and lend you a multiple of that if you passed the application.

Now lenders dig through your bank and credit accounts in order to assess what you are spending your money on, what you have left over each month and whether you could afford the monthly repayments on your mortgage.

If that wasn't bad enough they also "stress test" the results to see whether you could still afford the mortgage repayments if interest rates rose significantly.

"Since the new mortgage lending rules came into play a year ago, those looking to remortgage, existing borrowers who are moving home and looking for a new deal, and first time buyers will have been subject to their lender looking more closely – almost forensically – at their monthly outgoings," says Kevin Mountford, head of banking at Moneysupermarket.com.

"While the rules were introduced for the right reasons, in some cases borrowers who can easily afford a mortgage are being turned down for arbitrary reasons, despite them being able to easily afford mortgage repayments."

Desperate borrowers are now looking for ways they can trick the bank about their spending habits in order to pass the test. A survey by MoneySupermarket.com found that 20 per cent of people who are planning to apply for a mortgage in the next three years intend to withdraw more cash to pay for things so lenders can't see what they are spending their money on.

Another 21 per cent plan to put more on their credit card and pay it off at the end of each month so that their current account looks flusher for longer.

"It is clear that some consumers have changed their spending habits in order to pass the tests, so may be trying to paint a picture that is far from the reality just to satisfy requirements," says Mountford.

However, these tricks are unlikely to work. Lenders have access to your credit report as well as your bank statements so can easily see your monthly spending whether you do it on a credit card or your debit card.

Resorting to paying for items with cash is an even worse idea. If a lender can't get an idea of your actual spending from your bank statements they can use national averages. So, if you are spending less than the average person you could get stung.

A better idea is to follow the example of other people surveyed by Moneysupermarket.com who plan to cut back their monthly spending by an average of £159 in order to look better to lenders.

Another good idea to impress lenders is to clear all your debts ahead of your mortgage application. Not only do fewer debts make your credit rating better, it will also improve your results on the affordability tests as you won't have monthly debt payments to make.

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