Real Life Experiences Applying For Mortgages Recently

[Sure thing!]

Very interesting to see discussions materialising around affordability. What you are getting on a forum like this is real case scenarios... i.e The truth.

Its also a good sign to see that it is being given some thought by potential buyers, who may have in the past jumped in without any second thoughts and loaded themselves with debt.

Maybe the re-education of folk is happening already ... common sense begins to prevail! Someone tell EA's and vendors to catch up!

The banks are giving it a lot more thought. With some prices dropping to a level I thought was approaching acceptable I made some mortgage inquiries last week to make sure I knew what the score was if I had to make a move. My previous purchase was made by me as an individual, but a recent family addition and wife that will be looking after the little addition has had a huge impact on what they now call affordable and I completely agree with them on it too. Some change from my last experience where the broker said "But everyone else does it" because I wouldn't take the full amount available as I'd have to live on beans and toast to afford the repayments.

Affordability was the big question this time and dependents has made a huge dent in the total available (I hope this can't be fiddled/ignored). While I can get the money to move in to the sort of places I was thinking and its affordable, I'm not so keen now as if everyone else is subject to those same checks this crash has a way to run.

On a related note when I said my wife wouldn't be going back to work after maternity leave for a few years when asked by a colleague, I was questioned about how I could possibly afford that, "What about the mortgage and the bills?" Had to temper the response because the working woman asking the question has a peak price large house, two pre-school kids, babysitters plus his and her shiny Mercs. The truth you talk about is going to cause some damage.

[tinbin]

The banks are giving it a lot more thought. With some prices dropping to a level I thought was approaching acceptable I made some mortgage inquiries last week to make sure I knew what the score was if I had to make a move. My previous purchase was made by me as an individual, but a recent family addition and wife that will be looking after the little addition has had a huge impact on what they now call affordable and I completely agree with them on it too. Some change from my last experience where the broker said "But everyone else does it" because I wouldn't take the full amount available as I'd have to live on beans and toast to afford the repayments.

Affordability was the big question this time and dependents has made a huge dent in the total available (I hope this can't be fiddled/ignored). While I can get the money to move in to the sort of places I was thinking and its affordable, I'm not so keen now as if everyone else is subject to those same checks this crash has a way to run.

On a related note when I said my wife wouldn't be going back to work after maternity leave for a few years when asked by a colleague, I was questioned about how I could possibly afford that, "What about the mortgage and the bills?" Had to temper the response because the working woman asking the question has a peak price large house, two pre-school kids, babysitters plus his and her shiny Mercs. The truth you talk about is going to cause some damage.

Good post ... its great to get this sort of information about individual experiences first hand with banks etc. It tells the real story ... there are too many still believe that doors get shut on potential buyers because the banks dont have money to lend ... simply not true. They appear to be properly assessing applications now and rightly so.

There have been quite a few new posters here and its great to see this.

Perhaps a thread could be created to post recent experiences with banks/Mortgage Brokers etc so that we can build a picture of what is happening in the real world when ppl apply for MTG's based on current circumstances???

Edited September 11, 2011 by tinbin

[OptimusSubPrime]

Good post ... its great to get this sort of information about individual experiences first hand with banks etc. It tells the real story ... there are too many still believe that doors get shut on potential buyers because the banks dont have money to lend ... simply not true. They appear to be properly assessing applications now and rightly so.

There have been quite a few new posters here and its great to see this.

Perhaps a thread could be created to post recent experiences with banks/Mortgage Brokers etc so that we can build a picture of what is happening in the real world when ppl apply for MTG's based on current circumstances???

we have our mortgage app in at the minute, i will keep yous posted on how long they take etc...hopefully for us it goes through plain sailing! Best pal who is broker says should be a slam dunk case, but we went for overkill on the docs to submit at the start with more than we were required to supply, just to reduce the amount of back and forward with extra documentation etc

[tinbin]

Typed in ' How much can I borrow - Mortgages' into Google and got several online calculators which I presume will give an indication of the initial Income/Affordability ratios that the Banks will use for MTG criteria. (I suspect that 'How much can I borrow' is still unfortunately the first question that potential buyers still ask!!)

Interesting to note that dependants can be factored into the calculators in some cases.

http://www.nationwide.co.uk/mortgages/calculators/howmuchborrowafford.htm

http://www.woolwich.co.uk/mortgages/mortgage-calculator.html

http://www.natwest.com/personal/mortgages/g1/repayment-calculator.ashx

https://www.halifax.co.uk/mortgages/forms/minicalc/container.asp

Halifax interestingly enough will give you approx 4 times your joint salary (based on 2 applicants earning £25,000 with 2 kids), however if you consider the scenario whereby one has to leave work to look after the kids (i.e. I removed the income from the 2nd applicant) the most you could borrow is approx 2 times your income ...

The other points that I think would be worth mentioning in this thread are the conditions that are set by the Bank/Mortgage Provider which you cant find online ... i.e. Conditions such as requiring you to have been in the same employment for 2 yrs, is the type of industry an issue? What deposits are required?, Guarantors etc etc

Edited September 13, 2011 by tinbin

[NuBrit]

My sister-in-law has just bought a property using a 90% mortgage of three times her salary through Northern Bank. She's in retail and would be on about the average NI salary. The only thing she said that the bank was very particular that all the documentation was 100% complete and correct (she handed in 2.5 months of statements, the bank made her get the full 3 months).

It seems to me that if you're borrowing a reasonable amount of money (i.e. not 5 times your salary), you have at least 10% deposit and a clean credit history - then you'll get a mortgage no bother. I was talking with an ea, and he said as much. He said he has a big problem with sales falling through because you'll get civil servants who might be on £25k going to the bank and expecting to draw down £100k+ mortgages without having the 10% deposit.

[Shotoflight]

My sister-in-law has just bought a property using a 90% mortgage of three times her salary through Northern Bank. She's in retail and would be on about the average NI salary. The only thing she said that the bank was very particular that all the documentation was 100% complete and correct (she handed in 2.5 months of statements, the bank made her get the full 3 months).

It seems to me that if you're borrowing a reasonable amount of money (i.e. not 5 times your salary), you have at least 10% deposit and a clean credit history - then you'll get a mortgage no bother. I was talking with an ea, and he said as much. He said he has a big problem with sales falling through because you'll get civil servants who might be on £25k going to the bank and expecting to draw down £100k+ mortgages without having the 10% deposit.

This EA is quite well informed about Civil Servants, their salaries, the amount of mortgage finance they have requested, their lack of deposit etc.

Due to all of this, that he is knowledgable about, it causes him a big problem as sales, inevitably, fall through.

Either his is an odd scenario, or, if replicated, the market is riddled with these financially illiterate, well paid, civil servant cretins wishing to buy houses as they face losing their jobs. Causing him a big problem over lost sales.

Or perhaps he is the cretin.

[tinbin]

I am led to believe that the Ulster Bank are applying an 8% interest rate sensitivity on MTG applications. This may be on loans with a high LTV, im not sure of the specifics, but either way 8% is quite a sensitivity rating.

Good luck getting a mortgage approved on that basis!

[Shotoflight]

Time is running out for interest-only mortgages

Millions will be held captive as lenders withdraw, reports Chiara Cavaglieri

http://www.independent.co.uk/money/mortgages/time-is-running-out-for-interestonly-mortgages-7584347.html

Interest-only mortgages look to be on their way out after Coventry became the latest lender to tighten up its lending criteria. Along with Nationwide, Coventry announced this week that it would reduce its maximum loan to value to 50 per cent. If interest-only deals disappear altogether, many fear that thousands of borrowers could become mortgage prisoners, unable to remortgage or pay off their debt.

Martin Wheatley, a director of the Financial Services Authority (FSA), has spoken of his concern over the "ticking time-bomb" of 1.5 million mortgages, worth a colossal £120bn, which will come to an end over the next 10 years. The FSA says 80 per cent of these have no repayment strategy in place, and with lenders clamping down, many of these borrowers, now approaching retirement, could be forced to sell their homes.

Interest-only mortgages are certainly in a sorry state today; the lenders that haven't abandoned ship altogether are still clearly nervy about their exposure and when one acts, the others are sure to follow. It was only last month that Santander reduced its lending for interest-only to 50 per cent LTV, and both Nationwide and Coventry have reacted quickly.

"This is another nail in the coffin of interest-only," says Andrew Montlake from independent mortgage broker Coreco. "Lenders that have remained in the space up to 75 per cent have pretty much been forced into this move. No one can afford to be the last man standing with a share that is too heavily biased towards interest-only."

Anyone hoping to take out an interest-only mortgage now will have a tough time convincing lenders and will find it tricky to meet the increasingly strict criteria; Lloyds Banking Group recently said it would no longer accept cash savings (including ISAs) as a repayment vehicle. Experts say there is no room for complacency and that if your lender has not tightened its policy on interest-only yet, it is only a matter of time.

Lenders may be running scared now, but they were more than happy to lend during boom times – Council of Mortgage Lenders (CML) figures show that interest-only mortgages accounted for 33 per cent of all mortgages taken out in 2007. They had obvious appeal; you could secure a mortgage with lower monthly payments because you were covering only the interest, and at the end of the mortgage term, you could use your repayment vehicle (endowment policies were sold alongside them) to clear the capital debt.

However, the cracks began to show when lenders stopped ensuring that borrowers were making sufficient payments into these vehicles and instead, were happy to let homeowners take a punt on rising house prices to pay off the capital. Anyone who took out an interest-only mortgage in the lead up to the crash in 2008 did so at a time when people were borrowing sums well beyond their means.

Many of these borrowers could now be hanging on by a thread, kept afloat because rates are low, but extremely vulnerable if and when standard variable rates (SVRs) rise.

£50,000 rule for RBS interest-only mortgage deal

http://www.independent.co.uk/money/mortgages/50000-rule-for-rbs-interestonly-mortgage-deal-7593378.html

New interest-only mortgages taken out by Royal Bank of Scotland (RBS) and NatWest customers will be restricted to people earning at least £50,000 under fresh rules announced today.

The new requirements will help deal with market volatility and are part of RBS and its sister brand NatWest showing "responsible" lending by ensuring the mortgage is affordable to the consumer, the Royal Bank of Scotland group said.

The announcement follows general concerns of an interest-only mortgage "ticking time bomb" across the market, with worries previously raised that some borrowers currently on interest-only deals with lenders may find themselves unable to remortgage.

The group said the new rules are "in line" with recent changes across its competitors and it will retain the current loan-to-value (LTV) mortgage lending rate of 75%. The criteria changes only apply to residential mortgages and not to existing interest-only mortgages.

The changes mean that interest-only mortgages will only be available to RBS/NatWest customers who have banked with them for three months prior to application and payed in more than £1,000 salary per month into their current account.

Interest-only mortgages will only be available to customers who earn a minimum of £50,000 gross basic salary a year, before any regular overtime or bonus income is taken into account.

When there are joint applications, the main applicant must earn at least £50,000 basic salary gross and it is not enough for both applicants to be earning at least this amount combined.

The Bank of England expects lenders to tighten their borrowing criteria this year. Lenders have recently made a wave of recent mortgage rise announcements, affecting more than a million borrowers in total, blaming higher funding costs and the weak economy.

The property price boom fuelled a surge in interest-only mortgages, peaking at a third of all mortgage sales in 2007.

Taking such mortgages out was a way for consumers to increase their borrowing capacity at a time when property prices were outpacing wage increases.

More recently, sales of such products have accounted for less than 20% of mortgage sales as the subdued property market means lenders can no longer be certain that consumers will be able to remortgage elsewhere before the end of the mortgage term.

[tinbin]

I'm glad it is getting harder for 'investors' ... it was far too easy in the past. It makes me uncomfortable that so many 'investors' got rich off the back of the property boom & interest only loans, and even before that. It seemed a no brainer of a get rich quick scheme .. buy a property with an interest only loan (basically someone else's money), only service the interest repayments (more than covered by the rent charged) and then flip it for a profit. Banks foolishly made a lot of ppl rich by lending this money too easily.

Now we are in the opposite situation with property values in decline, banks demanding more stake, interest rates rising and a demand for some type of repayment plan for the loans. These same 'investors' are complaining!

I am playing my tiny violin for them as I type

Time is running out for interest-only mortgages

Millions will be held captive as lenders withdraw, reports Chiara Cavaglieri

http://www.independent.co.uk/money/mortgages/time-is-running-out-for-interestonly-mortgages-7584347.html

Interest-only mortgages look to be on their way out after Coventry became the latest lender to tighten up its lending criteria. Along with Nationwide, Coventry announced this week that it would reduce its maximum loan to value to 50 per cent. If interest-only deals disappear altogether, many fear that thousands of borrowers could become mortgage prisoners, unable to remortgage or pay off their debt.

Martin Wheatley, a director of the Financial Services Authority (FSA), has spoken of his concern over the "ticking time-bomb" of 1.5 million mortgages, worth a colossal £120bn, which will come to an end over the next 10 years. The FSA says 80 per cent of these have no repayment strategy in place, and with lenders clamping down, many of these borrowers, now approaching retirement, could be forced to sell their homes.

Interest-only mortgages are certainly in a sorry state today; the lenders that haven't abandoned ship altogether are still clearly nervy about their exposure and when one acts, the others are sure to follow. It was only last month that Santander reduced its lending for interest-only to 50 per cent LTV, and both Nationwide and Coventry have reacted quickly.

"This is another nail in the coffin of interest-only," says Andrew Montlake from independent mortgage broker Coreco. "Lenders that have remained in the space up to 75 per cent have pretty much been forced into this move. No one can afford to be the last man standing with a share that is too heavily biased towards interest-only."

Anyone hoping to take out an interest-only mortgage now will have a tough time convincing lenders and will find it tricky to meet the increasingly strict criteria; Lloyds Banking Group recently said it would no longer accept cash savings (including ISAs) as a repayment vehicle. Experts say there is no room for complacency and that if your lender has not tightened its policy on interest-only yet, it is only a matter of time.

Lenders may be running scared now, but they were more than happy to lend during boom times – Council of Mortgage Lenders (CML) figures show that interest-only mortgages accounted for 33 per cent of all mortgages taken out in 2007. They had obvious appeal; you could secure a mortgage with lower monthly payments because you were covering only the interest, and at the end of the mortgage term, you could use your repayment vehicle (endowment policies were sold alongside them) to clear the capital debt.

However, the cracks began to show when lenders stopped ensuring that borrowers were making sufficient payments into these vehicles and instead, were happy to let homeowners take a punt on rising house prices to pay off the capital. Anyone who took out an interest-only mortgage in the lead up to the crash in 2008 did so at a time when people were borrowing sums well beyond their means.

Many of these borrowers could now be hanging on by a thread, kept afloat because rates are low, but extremely vulnerable if and when standard variable rates (SVRs) rise.

£50,000 rule for RBS interest-only mortgage deal

http://www.independent.co.uk/money/mortgages/50000-rule-for-rbs-interestonly-mortgage-deal-7593378.html

New interest-only mortgages taken out by Royal Bank of Scotland (RBS) and NatWest customers will be restricted to people earning at least £50,000 under fresh rules announced today.

The new requirements will help deal with market volatility and are part of RBS and its sister brand NatWest showing "responsible" lending by ensuring the mortgage is affordable to the consumer, the Royal Bank of Scotland group said.

The announcement follows general concerns of an interest-only mortgage "ticking time bomb" across the market, with worries previously raised that some borrowers currently on interest-only deals with lenders may find themselves unable to remortgage.

The group said the new rules are "in line" with recent changes across its competitors and it will retain the current loan-to-value (LTV) mortgage lending rate of 75%. The criteria changes only apply to residential mortgages and not to existing interest-only mortgages.

The changes mean that interest-only mortgages will only be available to RBS/NatWest customers who have banked with them for three months prior to application and payed in more than £1,000 salary per month into their current account.

Interest-only mortgages will only be available to customers who earn a minimum of £50,000 gross basic salary a year, before any regular overtime or bonus income is taken into account.

When there are joint applications, the main applicant must earn at least £50,000 basic salary gross and it is not enough for both applicants to be earning at least this amount combined.

The Bank of England expects lenders to tighten their borrowing criteria this year. Lenders have recently made a wave of recent mortgage rise announcements, affecting more than a million borrowers in total, blaming higher funding costs and the weak economy.

The property price boom fuelled a surge in interest-only mortgages, peaking at a third of all mortgage sales in 2007.

Taking such mortgages out was a way for consumers to increase their borrowing capacity at a time when property prices were outpacing wage increases.

More recently, sales of such products have accounted for less than 20% of mortgage sales as the subdued property market means lenders can no longer be certain that consumers will be able to remortgage elsewhere before the end of the mortgage term.

[Ausdave]

The banks are giving it a lot more thought. With some prices dropping to a level I thought was approaching acceptable I made some mortgage inquiries last week to make sure I knew what the score was if I had to make a move. My previous purchase was made by me as an individual, but a recent family addition and wife that will be looking after the little addition has had a huge impact on what they now call affordable and I completely agree with them on it too. Some change from my last experience where the broker said "But everyone else does it" because I wouldn't take the full amount available as I'd have to live on beans and toast to afford the repayments.

Affordability was the big question this time and dependents has made a huge dent in the total available (I hope this can't be fiddled/ignored). While I can get the money to move in to the sort of places I was thinking and its affordable, I'm not so keen now as if everyone else is subject to those same checks this crash has a way to run.

On a related note when I said my wife wouldn't be going back to work after maternity leave for a few years when asked by a colleague, I was questioned about how I could possibly afford that, "What about the mortgage and the bills?" Had to temper the response because the working woman asking the question has a peak price large house, two pre-school kids, babysitters plus his and her shiny Mercs. The truth you talk about is going to cause some damage.

How has it worked out for you?

Personally found this time we had to jump through so many hoops and provide masses of paperwork, which I never had to provide approximately 10 yrs ago as a single applicant for a 100% mortgage with a lower salary.

Saying that the mortgage advisor in the bank was fantastic and kept us up to date with any changes. Entire process done in 3 weeks. (we had completed paperwork prior to this to see how much we could borrow in principle)

[NuBrit]

I was talking with an ea, and he said as much. He said he has a big problem with sales falling through because you'll get civil servants who might be on £25k going to the bank and expecting to draw down £100k+ mortgages without having the 10% deposit.

I said the same thing a few months ago and was jumped on. There are definitely people out there with delusions that banks are still offering mortgages that are over 3 times an income.

But yea, I agree with your point overall. If you have a clean credit record, a history of savings, all your documentation 100% - then you will have no bother getting a mortgage at 3x your salary.

[okaycuckoo]

Anecdotal from someone today: she's heard a few stories from 20-something acquaintances that 95-100% mortgages are freely on offer (independent of any gubmint indemnity scheme) but only if parents tie in the equity in their own properties, which has to be £100k min.

[Habeas Domus]

Anecdotal from someone today: she's heard a few stories from 20-something acquaintances that 95-100% mortgages are freely on offer (independent of any gubmint indemnity scheme) but only if parents tie in the equity in their own properties, which has to be £100k min.

Oh that'll work out well, when the whole family get repossessed together whose couch will they go to sleep on?

[tinbin]

Mortgage application fraud on rise

Fraudulent mortgage applications increased by 8% year on year in 2011, as "financially stressed" consumers tried to hide their bad credit ratings and lied about their jobs, a study has suggested.

A record 34 in every 10,000 applications for mortgages were found to be fraudulent in 2011, more than double the 15 in every 10,000 cases found in 2006 when the figures began, Experian said. There was a 4% increase in financial services application fraud overall, which was also driven by a growth in insurance and current account fraud, the study said.

The latest figure marks the fifth annual mortgage fraud increase in a row, with 93% of such attempted scams due to people "misrepresenting" their personal information on applications, most commonly by trying cover up a poor credit history, or making false claims about their employment status or the state of their finances.

Those who appear to be particularly succumbing to this type of fraud included young, well-educated professionals; young, less well-educated people living in small towns; and middle-aged skilled workers, the report suggested.

Mortgage availability is expected to dip in the coming months as lenders tighten their borrowing criteria amid the weak economy. Several lenders have already announced mortgage rate rises, affecting more than a million people in total.

Stricter mortgage lending rules will also come into place under plans by the Financial Services Authority (FSA) to ensure there is no return to irresponsible lending and borrowers can only take out deals they can afford, without relying on house price rises.

Fears have been raised of a "ticking time bomb" of people on interest-only deals who may find themselves unable to remortgage, with some 1.5 million interest-only mortgages worth around £120 billion due for repayment in the next decade.

The overall rate of fraud at point of application across the UK's financial services sector increased by 4% in 2011, to just over 17 in every 10,000 applications. Nick Mothershaw, a fraud director at Experian, said the rises in mortgage and insurance fraud will tend to have come from the "financially stressed segments of society".

http://money-news.money.aol.co.uk/article/2012/04/18/mortgage_application_fraud_on_rise

[tinbin]

Just a thought ... based on the issues in the recent past of 'mis-sold' endowments, insurance & PPI products and the major battering that the Banking industry has taken over same.

I wonder whether someone would actually have a case legally against a Bank/Finance House/Financial Adviser etc who lent them 6,7,8 & more times their salary based on the grounds that affordability surely could not have been demonstrated and that by doing so they put them in a worse financial position.

I'm sure there isn't ... and I am not one of these ppl who blames the banks for everything. But it is an interesting thought.