Eleven items. That was the length of the list in the first email from our broker, back in August, under a one-word subject line: "Documents". I'll admit that I, who produce payslips for a living, sent mine in as PDFs with a faint feeling of having done something wrong.
From agreement in principle to offer
We used a broker who doesn't charge us a fee. They're paid by the lender, which they told us in the first call and again in writing. An agreement in principle is the lender saying, on paper, that it would probably lend you a certain amount, subject to checks. It isn't a promise, but it's what let us start viewing houses with a number in our heads. Ours came through in August, for 90% of the price.
The full application after our offer was accepted wanted the following, more or less:
- Three months of payslips each, and the latest P60.
- Three months of bank statements for every account we use.
- Passports and proof of address.
- The Lifetime ISA statement and proof of where Matt's savings had come from.
- An answer to "is any of the deposit a gift?", which for us was no, so that form was short.
The lender looks at what you spend as well as what you earn, so we spent three months being thoroughly ordinary. The only query that came back was about a £320 payment out of Matt's account in July, which turned out to be a second-hand mitre saw. The broker passed on a photo of the receipt, which Matt had kept, in a drawer, in date order.
The loan works out at about two and a half times our joint income, which is as specific as I'm going to get. The lender's valuation matched the price. The mortgage offer arrived on 29 October for 90% of £190,000, which was £171,000, and when the price came down to £187,500 on 8 November the broker asked for it to be amended, and a new offer for £168,750 came the week after.
The fee-free one
The choice that took us longest was between two five-year fixes. One was 4.84% with no arrangement fee. The other was 4.69% with a £999 fee. A lower rate is tempting, so we did the sums over the five years, with a calculator and a lot of tea.
On a loan of £168,750 over 30 years, the lower rate was about £15 a month cheaper. Over the 60 months of the fix, that adds up to roughly £916 saved against a fee of £999, so we'd have been about £83 behind before even counting that a £999 fee comes out of our cash or gets added to the loan and charged interest. Neither of those suited us when we were already counting every pound we had on the day. We took the fee-free one at 4.84%, which comes to about £889 a month, fixed until the end of February 2030.
That's £164 more than our rent, before council tax, water and the rest. I looked at that gap for a long time. Then I opened the spreadsheet and gave it its own row.
Why five years rather than two
A two-year fix would have been cheaper in the early months, but it would also have meant going through all of this again in 2027, probably just as we were running out of cash for the first big repair. A five-year fix gives us one number we can stop thinking about. There's a charge if we ever want out of it early, which our broker explained and which I've written on the first page of the mortgage folder.
I should be clear that I'm describing what we chose, not what anyone else should. Our broker went through the options with us, and a mortgage adviser looks at your numbers, whereas I only know ours.
Matt asked what happens if rates fall tomorrow. The broker's answer was "then you'll be annoyed for five years", which I thought was fair.
