Mortgage application changes 14-04-14
Discussion
12 months ago Barclays were doing similar with our first joint mortgage application probably due to the wife never having had a mortgage. A lot different to 10 years ago when they were approving everything and letting me buy 3 houses I couldn't afford if the tenants suddenly all died.
Not such a bad thing IMO going to be a big problem for London types I imagine they need every multiple they can lay their hands on to get anywhere close to buying.
Not such a bad thing IMO going to be a big problem for London types I imagine they need every multiple they can lay their hands on to get anywhere close to buying.
Type R Tom said:
What will be interesting is when people come to remortgage. If you organised one a couple of years ago and now looking for another deal you might suddenly find you can no longer afford your house, will be gutting if you’ve quite happily been paying the mortgage without any problems.
Surely the same lender would take that into account? I have mates with 95% mortgages who would no fail who wouldn't have a clue about these new rules. Type R Tom said:
What will be interesting is when people come to remortgage. If you organised one a couple of years ago and now looking for another deal you might suddenly find you can no longer afford your house, will be gutting if you’ve quite happily been paying the mortgage without any problems.
I would assume if they can't get accepted on a re-mortgage then they would have no choice but to go onto their current lenders SVR. With whatever interest increase this will give them.NightDriver said:
I would assume if they can't get accepted on a re-mortgage then they would have no choice but to go onto their current lenders SVR. With whatever interest increase this will give them.
Yeah, heard of people being forced onto the SVR that then increases their monthly payments because they can't negotiate a new deal. Always though it a little strange as you’re going to be more likely to have trouble if you’re paying more per month Ozzie Osmond said:
You gotta love the mortgage process.
The changes since 2008 should have stopped this happening. - Folks who lie through their teeth and don't default - are away and laughing.
- Folks who lie through their teeth and DO default - leave everyone else to clear up the mess, just like before.
Basically they cut 'self certification' whereby you simply had to sign to say you earned as much as you needed to, to borrow the amount you wanted - in hindsight, it was obvious that large swathes of people who saw their income climb year on year and in the absolute certainty that houses always went up in value 'fibbed' their way into greater and greater debt they could only afford if they continued to in debt themselves to fund their lifestyles, only to re-finance everything with an even bigger self-cert remortgage every 2 years.
Our 0.5% interest rates and rules governing how banks have to deal with defaulters kept the wolves from their doors in 2008-2012 and HTB now it giving them an opportunity to get out of their mess by selling up before rates jump - not that many will IMHO.
These new rules are simply a better / more complex way to calculate affordability - it means that just because you earn 50k a year, you can't borrow £250k if you happen to owe £50k already.
But that's all it does - you put in the figures and it spits out a max lend amount - you now have to prove your income - so the lenders know your income, know what you have to pay each month on debt thanks to credit reports and take into account other lifestyle expenses
Tophatron said:
This might be an "unknown unknown", but how much will things like eating out etc. impact it (i.e. spending that can easily be curtailed as necessary)? Or is it mainly looking to work out your commitments - regular payments you're going to have to make each month?
This sort of this is not a criteria of lending. If it's a marginal lend an underwriter might ask for bank statements, but that's usually just to confirm what they've already been told. Typically the type of person who'll forgo paying bills in favour of eating out every weekend will have an equally reckless credit history.
GTO Scott said:
How does a £4k credit card make £20,000 of difference?
I think the simpler answer is that the interest rate on the credit card will be roughly five times the rate on the mortgage - so roughly five times the cost, soaking up roughly five times as much disposable income.P-Jay said:
These new rules are simply a better / more complex way to calculate affordability - it means that just because you earn 50k a year, you can't borrow £250k if you happen to owe £50k already.
But that's all it does - you put in the figures and it spits out a max lend amount - you now have to prove your income - so the lenders know your income, know what you have to pay each month on debt thanks to credit reports and take into account other lifestyle expenses
Yes, I understand that. But it seems to me anyone who wants to sidestep the process can simply make sure they are running multiple bank accounts to make their "outgoings" much more "flexible" when it comes to ticking the boxes.But that's all it does - you put in the figures and it spits out a max lend amount - you now have to prove your income - so the lenders know your income, know what you have to pay each month on debt thanks to credit reports and take into account other lifestyle expenses
Ozzie Osmond said:
I think the simpler answer is that the interest rate on the credit card will be roughly five times the rate on the mortgage - so roughly five times the cost, soaking up roughly five times as much disposable income.
It's got nothing to do with the interest rate of the credit card.......Ozzie Osmond said:
Yes, I understand that. But it seems to me anyone who wants to sidestep the process can simply make sure they are running multiple bank accounts to make their "outgoings" much more "flexible" when it comes to ticking the boxes.
The lender, I would imagine, will want to see your main account where your earnings are paid into. If your running multiple accounts and paying bills from them then you need to feed these other accounts from somewhere (i.e. your earning account). I'm sure they will quite easily pick up on a monthly transfer of £XX to another bank account and no doubt question it.Ozzie Osmond said:
Yes, I understand that. But it seems to me anyone who wants to sidestep the process can simply make sure they are running multiple bank accounts to make their "outgoings" much more "flexible" when it comes to ticking the boxes.
ALL bank accounts show up on your credit file. Lenders like West Brom BS have been asking for bank statements for all accounts showing on your credit file for quite a while, most will be following suit now.NightDriver said:
The lender, I would imagine, will want to see your main account where your earnings are paid into. If your running multiple accounts and paying bills from them then you need to feed these other accounts from somewhere (i.e. your earning account). I'm sure they will quite easily pick up on a monthly transfer of £XX to another bank account and no doubt question it.
Yep, banks aren't as stupid as they sometimes portray themselves!.I've just been through this process, my situation is about two months ago I was provided a mortgage promise, found a property, agreed a price and had the offer accepted about three weeks ago. I went into the bank and completed a mortgage application, paid for the survey etc... And was advised that providing all of the searches were ok then I would receive an offer within 14 days. On the 14th day I received a phone call from my mortgage advisor saying that there had been some "system" changes and some more information was needed, obviously this was starting to concern me so I did a bit of homework and discovered the MMR was coming into place on 26th April. So last Thursday I was faced with a long bank holiday weekend meaning I couldn't speak to anyone at my bank and a load of self researched information about MMR, needless to say I was starting to wobble!
OnTuesday this week I had a morning appointment at my bank, following my research I gathered every utility bill, bank statement, receipts and income info I had. I sat with my mortgage advisor and she explained that my application had automatically switched over from the old to new system and I was now required to submit additional information. I was asked questions about all of my expenditure, hobbies and general cost of living. I was prepared for this following my research and accurately answered the questions to the penny, I felt as though it was a box ticking exercise but very thorough. I left the bank on Tuesday unsure what the outcome would be, I was advised that they would prioritise my application and the mortgage advisor would update me with any progress, the bank rang me twice on Wednesday with a no news update and yesterday morning stating that the underwriters were working on it. At about 4pm yesterday my mobile rang and it was the bank, the mortgage advisor said there was some news and the system had been updated with a mortgage offer. As you can probably appreciate a huge relief!
My advice to anyone applying for a mortgage would be preparation, gather all of your financial information as this will really help speed things up for you because they will need to know the in and outs of your financial circumstances either way and longer you take to provide the information the longer the application will take as there is no "bypassing" the questions.
Good luck!
OnTuesday this week I had a morning appointment at my bank, following my research I gathered every utility bill, bank statement, receipts and income info I had. I sat with my mortgage advisor and she explained that my application had automatically switched over from the old to new system and I was now required to submit additional information. I was asked questions about all of my expenditure, hobbies and general cost of living. I was prepared for this following my research and accurately answered the questions to the penny, I felt as though it was a box ticking exercise but very thorough. I left the bank on Tuesday unsure what the outcome would be, I was advised that they would prioritise my application and the mortgage advisor would update me with any progress, the bank rang me twice on Wednesday with a no news update and yesterday morning stating that the underwriters were working on it. At about 4pm yesterday my mobile rang and it was the bank, the mortgage advisor said there was some news and the system had been updated with a mortgage offer. As you can probably appreciate a huge relief!
My advice to anyone applying for a mortgage would be preparation, gather all of your financial information as this will really help speed things up for you because they will need to know the in and outs of your financial circumstances either way and longer you take to provide the information the longer the application will take as there is no "bypassing" the questions.
Good luck!
Ozzie Osmond said:
P-Jay said:
These new rules are simply a better / more complex way to calculate affordability - it means that just because you earn 50k a year, you can't borrow £250k if you happen to owe £50k already.
But that's all it does - you put in the figures and it spits out a max lend amount - you now have to prove your income - so the lenders know your income, know what you have to pay each month on debt thanks to credit reports and take into account other lifestyle expenses
Yes, I understand that. But it seems to me anyone who wants to sidestep the process can simply make sure they are running multiple bank accounts to make their "outgoings" much more "flexible" when it comes to ticking the boxes.But that's all it does - you put in the figures and it spits out a max lend amount - you now have to prove your income - so the lenders know your income, know what you have to pay each month on debt thanks to credit reports and take into account other lifestyle expenses
As a minimum I would suspect they'll ask for bank statements - or if you're applying with your own bank they'll have them anyway - so your income comes in, that's easy to see and your monthly direct debits show what you spend your money on by and large - credit report will show any other debt commitments so that can be confirmed.
So perhaps you think you might not pass an MMR test - well firstly, you'd be a mug to try to because it's there to save customers from themselves, but self-cert proved people can't be trusted so say you have a second account and pay for your childcare and large pension payments from there - well then lender is going to see £x being transferred to another account - they're either going to ask what the money is for or where it's going. You can either be honest or you can lie - neither will help your cause because they'll want to see the statements.
P-Jay said:
As a minimum I would suspect they'll ask for bank statements
Yep. My mortgage is with and I bank with HSBC. I transfer money to a joint account elsewhere that pays household bills. They wanted copies of all statements and followed the paper trail.
In my case they wanted 12 months pay slips and 3 years P60's also - which weeds out the "yeah I always pull £xx k in bonuses/overtime every year" brigade.
If you are marginal on the lending amount, then my advice would be to clear down all your credit cards, get rid of all your loans/finance and remove/reduce all regular commitments (Bin sky movies and sports for a start!!)
Im not looking forward to doing this next time.
My bank accounts are a mess! I move money about here and there all the bloody time and have about 3 different savings accounts online! It wont look good even though the money never leaves my posession. They will just have to deal with it I suppose.
My bank accounts are a mess! I move money about here and there all the bloody time and have about 3 different savings accounts online! It wont look good even though the money never leaves my posession. They will just have to deal with it I suppose.
The FCA have got to change the criteria in the coming months. You could say,fair enough, if it is a loan or childcare or commitment that "has" to be honoured.
I can't see that an "optional" hobby or passtime, like a Gym Membership, club membership, that can be cancelled at short notice and is not a binding "financial commitment" can be used against lending you a mortgage. If times get hard you cancel it, or are we no longer trusted to make decisions like this?
There is nothing to stop me going out and getting a mortgage, then tomorrow joining to the gym, joining a golf club etc with any spare disposable income. It makes a bit of a mockery of the regulation if that is the case.
This is where there needs to be a distinction between what is a binding commitment and what is something you choose to do with your spare money. I don't think you can fairly lump it all together and deduct it from what someone can borrow. Having been on the fringes of seeing how the FSA/FCA operates, they have probably waited 4 years, given some woolly guidance to all the mortgage lenders, who have tried to read between the lines and come up with something that meets their ambiguous guidelines. RDR/CASS seem to spring to mind as well.
I can't see that an "optional" hobby or passtime, like a Gym Membership, club membership, that can be cancelled at short notice and is not a binding "financial commitment" can be used against lending you a mortgage. If times get hard you cancel it, or are we no longer trusted to make decisions like this?
There is nothing to stop me going out and getting a mortgage, then tomorrow joining to the gym, joining a golf club etc with any spare disposable income. It makes a bit of a mockery of the regulation if that is the case.
This is where there needs to be a distinction between what is a binding commitment and what is something you choose to do with your spare money. I don't think you can fairly lump it all together and deduct it from what someone can borrow. Having been on the fringes of seeing how the FSA/FCA operates, they have probably waited 4 years, given some woolly guidance to all the mortgage lenders, who have tried to read between the lines and come up with something that meets their ambiguous guidelines. RDR/CASS seem to spring to mind as well.
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