Warning to millions of first-time buyers over little-known payslip code that could make it harder to get a mortgage
MILLIONS of first-time buyers are being warned about a little-known payslip code that could make it harder for them to get a mortgage.
Mortgage rates remain high and hopeful homeowners may feel like the odds of getting on the property ladder are stacked against them.
The number of mortgage approvals for house purchases dipped in May, according to data from the Bank of England, showing that buyers are finding it hard to secure a home.
On top of the tough market conditions, many first-time buyers may not be aware that their student loan could be hindering their ability to secure a mortgage.
Around 1.5 million people in the UK currently have a student loan, and millions more are making repayments to the Student Loan Company.
Graduates start repaying their student loan when their income is over a certain threshold.
When you start repaying your loan, and how much you have to pay, depends on which repayment plan you’re on.
If you’re a graduate, and you’re not sure if you are repaying your debt, then look for the code “CSL Student Loan Ded” or “CSL Ded” on your payslip.
And it’s vital that first-time buyers pay attention to this code, because it could have a significant impact on their ability to get a loan.
Nicholas Mendes, mortgage technical manager at broker John Charcol, said: “When a large chunk of your salary goes towards student loan repayments each month, it can reduce how much you can borrow for a mortgage.
“Lenders look at how much you owe each month compared to your income.
“If a big part of your income goes to paying off student loans, lenders may think you won’t be able to handle additional debt, which can lead to a smaller mortgage offer.”
Plus, having a student loan repayment coming out of your monthly income can make saving for a deposit more tricky.
Nick added: “Student loan repayments can also cut into your disposable income – the money you have left after paying all your bills.
“Saving a good deposit is important not just for getting a mortgage but also for getting better interest rates and terms.
“Because of student loan repayments, it might take longer to save enough for a deposit, delaying your ability to buy a home.”
But Sarah Coles, personal finance analyst at Hargreaves Lansdown, said graduates may still find themselves in a better position to buy a house compared with wannabe buyers who didn’t attend University.
She said: “It’s not all bad though, because going to university raises your average salary on graduation, which is going to help with affordability.”
Mortgage affordability is being able to comfortably repay your mortgage repayments each month.
And generally, the more you earn, the more attractive you are to lenders.
The government recently revealed that £40,000 was the average salary for working age graduates in 2023.
This was compared with £29,500 for non-graduates.
If you’re struggling to get a deposit together, The Sun has put together a guide to all the first-time buyer schemes that accept a tiny deposit.
How to increase your chances of getting a mortgage approval
Get a mortgage in principle
A mortgage in principle is an official estimate from a lender of how much it’s willing to lend to you based on what you can afford.
It can be a pretty useful thing for those hunting for a first home because it shows that you’re a serious buyer.
To get an agreement in principle, you can either go to a mortgage broker and see what deals are available that you may be eligible for.
It’s important to remember that a broker may charge a fee to put together an agreement in principle for you, so make sure to ask about this first.
Alternatively, you can go directly to the lender that’s offering a deal that you’re interested in.
Going to a lender doesn’t mean that you have to borrow from them when it comes to applying for a mortgage, so don’t worry about getting tied in.
Get mortgage advice
It can be tempting to go directly to a bank or building society for your first mortgage, but doing so could severely limit your options.
Visiting a broker six months in advance can be useful to help you work out what your maximum purchase price will be.
A broker will be able to review a wider range of products and advise you on the right one for your circumstances, as well as assess any hidden costs which can sometimes be difficult to find.
Remember though, they’ll take a fee for their services so you’ll need to factor that into your costs.
Check your credit score
If you’ve got a bad credit record, the best thing to do in the first instance is to find out what your score is.
You can check your credit file for free on websites like ClearScore and Credit Karma.
If you find that you do have bad credit, this isn’t to say that providers won’t lend you any money.
Ensure you continue to pay your bills on time, are on the electoral register and avoid any unnecessary hard searches on your credit file.
Don’t take on debt
You should avoid applying for any new credit at least three months before getting a mortgage.
Your lender will be aware of this new payment and wonder if you’re over-stretching your finances.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
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