Getting a mortgage: Things ain't what they used to be
Getting a mortgage with a high percentage advance, at the low interest rates being advertised in the media, is impossible.
Lenders are lending less than they were at the height of the market, with total lending in 2011 likely to be less than 40% of 2007's total.
This climate means that lenders on the whole now adopt a "pricing for risk" policy and are still rationing their lending.
This means that you can anticipate that at 90% loan-to-value, a loan may cost close to 5% interest, but a 60% loan will carry an interest rate nearer to 2%.
Lenders are also less flexible in their attitude to new prospective borrowers - and even existing ones who want a fresh loan.
Meanwhile the continued culling of banking jobs leads to few people in authority wishing to take any risks.
As a result, totally sound borrowing proposals are being turned down by lenders.
This leaves borrowers confused and annoyed and needing to find an alternative lender in a hurry.
To illustrate the frustrations you can encounter, and to put you on your guard, here are some problems that we have encountered recently.
Now I understand that some or all of these examples may seem unusual and perhaps involve larger loan sizes than the national average, but they are used here to prove a point.
Your own circumstances may seem simple and obviously deserving of a mortgage.
But your chosen lender may decide otherwise.
They may keep falling back on unreasonable rules in order to allow them to say no to you, and only lend to the most risk-free applicants to ensure their own jobs with your lender remain safe.
For instance, a self-employed applicant running his business for 20 years and making over £100,000 per annum was refused a loan of 30% of the value of his home.
This was despite the loan being less than 2.5 times his income.
The explanation was that if "goodwill" was stripped out of his business, the income would fall and thus make the loan unsustainable.
No appeal against the decision was acceptable to the lender, despite having had a perfectly conducted mortgage for 20 years.
In an other example, an employed couple had their application approved by the lender and moved on with the process.
The application was then terminated because, in the lender's opinion, the funds being raised for home improvements would be repaid too quickly.
This potentially made the loan "short term borrowing" even though the loan was a flexible mortgage that allowed for total redemption for any reason with no penalties.
Three appeals to the lender were rejected.
Another couple who had been through a financially difficult five years decided to downsize.
They wished to reduce their mortgage from £600,000 to £120,000, and to repay all other debts of £150,000 when they moved.
They approached their current lender and proposed a suspension of mortgage payments until the property was sold.
Six months later they had a new home agreed and an offer on their property and a lender who would help with the new mortgage.
They approached the current lender, who had not communicated with the borrowers in any fashion for six months, for a reference.
The current lender then denied any agreement to suspend payments, despite not applying for any payments or communicating with the client for six months.
They would only confirm arrears of six months or more on the account - thus denying the borrowers a new mortgage as the new lender needed a reference.
Public respectability and status does not appear to confer any advantage.
A professional couple already borrowing £550,000 needed a further advance of £250,000.
By reorganising their current borrowings they could arrange the extra funding to be available for an identical monthly cost.
Despite the fact that they were already paying the same amount per month to the lender, they were asked to produce three months of bank statements to prove "affordability".
Getting originals documents for one of them was tricky but internet bank statements were submitted, signed by the applicant as true copies, but these were unacceptable.
The applicant, by the way, was a judge.
The lender then suggested that their "affordability model" now suggested that the mortgage was in fact "unaffordable".
The loan term would need to be lengthened, the lender said, even though the current costs were no higher than the proposed future costs.
This added thousands of pounds to the borrowers' potential costs over the years.
In each of these cases we negotiated solutions with alternate lenders or negotiated with the proposed lenders.
We were finally able get someone to see the sense and commerciality in the proposed loans and our clients finally got what they wanted.
An experienced and well connected broker (of which there are many) can persuade lenders to change their minds or rapidly change lender to ensure your aims are achieved.
They can do this because brokers arrange thousands of mortgages in a career.
You, on the other hand, may only apply for two or three in your lifetime so it is worth remembering there is no substitute for experience.
The current lesson here is simple.
Do do not expect that once you have your deposit and your stamp duty saved, and you have identified a property, made an offer and approached a lender with apparently attractive terms, that your problems are over.
Often they are only just beginning. Such is life in the 2011 mortgage market.
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