Imposed mortgage conditions
Discussion
I have sold my current house and reserved a new build, sale and purchase are expecting to complete by the end of next month, if not chain will likely fall apart. My bank (who I've been with for over 23 years) have now decided to impose some extra conditions on the mortgage - they are making us forfeit a significant chunk of our savings and take out a larger loan than we need (conveniently just pushing us out of the 40% LTV bracket...) The reason, to pay off the finance on two cars (the combined monthly payments of which are barely 11% of our monthly income)
Moving banks is not an option at the moment as we're locked in till the end of Nov and would have to pay a 5k penalty. I fully intend to move all my business elsewhere come November and am in the process of getting a new mortgage in place ready for when my current deal expires.
My understanding is that these terms will be a named condition on the mortgage offer and our solicitor will ask to see evidence that we've complied with it after completion, if I don't comply with the conditions what's the likelihood that the bank will actually do anything about it bearing in mind that I'll only be with them for another 3 months at the most?
Moving banks is not an option at the moment as we're locked in till the end of Nov and would have to pay a 5k penalty. I fully intend to move all my business elsewhere come November and am in the process of getting a new mortgage in place ready for when my current deal expires.
My understanding is that these terms will be a named condition on the mortgage offer and our solicitor will ask to see evidence that we've complied with it after completion, if I don't comply with the conditions what's the likelihood that the bank will actually do anything about it bearing in mind that I'll only be with them for another 3 months at the most?
What is the exact wording of the clause inserted into the Offer?
If they are making you redeem the finance then that would intimate that your affordability doesn't fit without it being redeemed meaning it's likely that your Solicitor would need to see evidence of the finance having been redeemed on or before completion.
The wording of the clause is key.
If they are making you redeem the finance then that would intimate that your affordability doesn't fit without it being redeemed meaning it's likely that your Solicitor would need to see evidence of the finance having been redeemed on or before completion.
The wording of the clause is key.
I don't have it to hand at the moment, however I don't see how they can claim its down to affordability, the new mortgage and cars only account for 42% of our monthly income, both of us are in stable jobs, absolutely no history of bad credit, no dependents or expensive hobbies (aside from running a v10...) What's more annoying is that the more expensive car is with the same bloody bank!
CSLchappie said:
I don't have it to hand at the moment, however I don't see how they can claim its down to affordability, the new mortgage and cars only account for 42% of our monthly income, both of us are in stable jobs, absolutely no history of bad credit, no dependents or expensive hobbies (aside from running a v10...) What's more annoying is that the more expensive car is with the same bloody bank!
There is no other reason, other than affordability, for them to insist on the repayment of the finance.....remember, what YOU think is affordable, often isn't in line with what a lender deems to be affordable....Sorry, but I don't agree, I know its affordable, my bank know its affordable as I do everything through them and other lenders have said our situation is affordable. When we remortgaged with them a couple of years ago they imposed a similar condition to repay a minor balance on a credit card (less than a £1k) At the time it was the only debt we had aside from the mortgage, now it feels like a cynical tactic so that we only owe money to them and no-one else.
CSLchappie said:
Sorry, but I don't agree, I know its affordable, my bank know its affordable as I do everything through them and other lenders have said our situation is affordable. When we remortgaged with them a couple of years ago they imposed a similar condition to repay a minor balance on a credit card (less than a £1k) At the time it was the only debt we had aside from the mortgage, now it feels like a cynical tactic so that we only owe money to them and no-one else.
So, have you actually asked them why you have to pay it off?Yes, the only answer given is that the underwriter wants all other commitments paid off. Affordability was discussed in regards to the term we've chosen (currently 15 years and as we need to borrow another 19k they offered an 18 year term) but overall affordability has not been given as the reason as to why we must comply with these demands, its Lloyds it if makes any difference.
The irony is, if they allowed us to borrow just what we need, from November onwards once we remortgage at current rates the monthly payment would be slightly less than it is now.
The irony is, if they allowed us to borrow just what we need, from November onwards once we remortgage at current rates the monthly payment would be slightly less than it is now.
CSLchappie said:
Yes, the only answer given is that the underwriter wants all other commitments paid off.
No matter what you say, this bank does not think it is affordable without paying the other commitments down.Affordability is not just how thing stand now this minute, but in future if things change. You don't know what scenarios the underwriter may have applied. He may be right!
CSLchappie said:
Yes, the only answer given is that the underwriter wants all other commitments paid off. Affordability was discussed in regards to the term we've chosen (currently 15 years and as we need to borrow another 19k they offered an 18 year term) but overall affordability has not been given as the reason as to why we must comply with these demands, its Lloyds it if makes any difference.
The irony is, if they allowed us to borrow just what we need, from November onwards once we remortgage at current rates the monthly payment would be slightly less than it is now.
Remember all the screaming and shouting about irresponsible bankers lending too much.The irony is, if they allowed us to borrow just what we need, from November onwards once we remortgage at current rates the monthly payment would be slightly less than it is now.
This is what happens.
CSLchappie said:
Yes, the only answer given is that the underwriter wants all other commitments paid off. Affordability was discussed in regards to the term we've chosen (currently 15 years and as we need to borrow another 19k they offered an 18 year term) but overall affordability has not been given as the reason as to why we must comply with these demands, its Lloyds it if makes any difference.
The irony is, if they allowed us to borrow just what we need, from November onwards once we remortgage at current rates the monthly payment would be slightly less than it is now.
Usually the only reason for insisting on credit being redeemed would be that it does not fit on the terms you are applying for. For them to insert it as a condition of the offer would normally mean that you would need to provide your Solicitor a copy of the redemption statement on or before completion. It just depends on the wording they've given...........The irony is, if they allowed us to borrow just what we need, from November onwards once we remortgage at current rates the monthly payment would be slightly less than it is now.
At no point have they said we need to reduce the total amount of debt we have (i.e sell a car) They seem to be quite happy with the total amount of borrowing - so long as its all via the mortgage.
We have offered to put long term savings into the purchase to actually reduce the overall mortgage needed, fine they said, but you still need to pay both cars off. There doesn't seem to be any correlation between overall borrowing and monthly repayments, regardless of what we borrow, they are insisting on paying both cars off. To put this in perspective, I've spoken with another high street bank, been through all current commitments and they have offered to lend us over 40k more than we're asking from Lloyds, over the same term but without the need to repay the cars.
To me its the principal, I think I'm reasonably good at budgeting and managing my finances, it also seems quite irresponsible of the bank to ask us to forfeit most of our quick access savings leaving us with very cash available for emergencies whilst at the same time we have to take on a bigger mortgage than we need to buy the property.
We have offered to put long term savings into the purchase to actually reduce the overall mortgage needed, fine they said, but you still need to pay both cars off. There doesn't seem to be any correlation between overall borrowing and monthly repayments, regardless of what we borrow, they are insisting on paying both cars off. To put this in perspective, I've spoken with another high street bank, been through all current commitments and they have offered to lend us over 40k more than we're asking from Lloyds, over the same term but without the need to repay the cars.
To me its the principal, I think I'm reasonably good at budgeting and managing my finances, it also seems quite irresponsible of the bank to ask us to forfeit most of our quick access savings leaving us with very cash available for emergencies whilst at the same time we have to take on a bigger mortgage than we need to buy the property.
CSLchappie said:
At no point have they said we need to reduce the total amount of debt we have (i.e sell a car) They seem to be quite happy with the total amount of borrowing - so long as its all via the mortgage.
We have offered to put long term savings into the purchase to actually reduce the overall mortgage needed, fine they said, but you still need to pay both cars off. There doesn't seem to be any correlation between overall borrowing and monthly repayments, regardless of what we borrow, they are insisting on paying both cars off. To put this in perspective, I've spoken with another high street bank, been through all current commitments and they have offered to lend us over 40k more than we're asking from Lloyds, over the same term but without the need to repay the cars.
To me its the principal, I think I'm reasonably good at budgeting and managing my finances, it also seems quite irresponsible of the bank to ask us to forfeit most of our quick access savings leaving us with very cash available for emergencies whilst at the same time we have to take on a bigger mortgage than we need to buy the property.
They're turning unsecured debts into secured ones.We have offered to put long term savings into the purchase to actually reduce the overall mortgage needed, fine they said, but you still need to pay both cars off. There doesn't seem to be any correlation between overall borrowing and monthly repayments, regardless of what we borrow, they are insisting on paying both cars off. To put this in perspective, I've spoken with another high street bank, been through all current commitments and they have offered to lend us over 40k more than we're asking from Lloyds, over the same term but without the need to repay the cars.
To me its the principal, I think I'm reasonably good at budgeting and managing my finances, it also seems quite irresponsible of the bank to ask us to forfeit most of our quick access savings leaving us with very cash available for emergencies whilst at the same time we have to take on a bigger mortgage than we need to buy the property.
CSLchappie said:
At no point have they said we need to reduce the total amount of debt we have (i.e sell a car) They seem to be quite happy with the total amount of borrowing - so long as its all via the mortgage.
Which figure is higher;- The higher mortgage payment once the finance is paid off
Or;
- The total of the lower mortgage payment PLUS the two finance monthly payments?
The assumption would be that the first option, what they are wanting you to do, is the lower total monthly payment. It's all about affordability and disposable income.
It has nothing to do with the total debt or who the debt is with or whether it's mortgages, finance or credit card balances; it's what each of those debts is costing you per month and what impact it has on your disposable income and therefore the level of risk to them and the money they are lending you.
Every lender will set their own affordability requirements, some are more restrictive than others.............
Surely they are protecting their position by making you clear your debts and having one big secured loan with them so that if you default they can repo.
Sensible non?
Plus "affordability" means can you afford it if interest rates go up, remember they are at historic lows. They have to stress test your finances.
If I was them I would want all your debts cleared, and the total capital you owe secured against your property.
Sensible non?
Plus "affordability" means can you afford it if interest rates go up, remember they are at historic lows. They have to stress test your finances.
If I was them I would want all your debts cleared, and the total capital you owe secured against your property.
Edited by Soov535 on Wednesday 29th July 12:19
We have a good income and plenty of cushion in longer term savings, we'll also have over 40% equity in the property - its not like we're first time buyers who are struggling to put a deposit together and while I don't think it that likely we could still afford to pay the mortgage if we saw rates go up to 4-5% as they were 10 years ago.
Sarnie, yes the higher monthly cost is smaller mortgage with car finance still in place, around £200pcm higher. I appreciate different lenders will have different criteria for 'affordability' but there does seem to be a substantial gap with Lloyds, as I said been vetted by another high street bank with no problems, we were also pre-approved by an IFA as a prerequisite to putting the offer in on the new house, again no issues, affordability perfectly fine and we could have taken out a much higher mortgage (albeit over a longer term) if we wanted.
Sarnie, yes the higher monthly cost is smaller mortgage with car finance still in place, around £200pcm higher. I appreciate different lenders will have different criteria for 'affordability' but there does seem to be a substantial gap with Lloyds, as I said been vetted by another high street bank with no problems, we were also pre-approved by an IFA as a prerequisite to putting the offer in on the new house, again no issues, affordability perfectly fine and we could have taken out a much higher mortgage (albeit over a longer term) if we wanted.
Soov535 said:
Surely they are protecting their position by making you clear your debts and having one big secured loan with them so that if you default they can repo.
Sensible non?
Plus "affordability" means can you afford it if interest rates go up, remember they are at historic lows. They have to stress test your finances.
If I was them I would want all your debts cleared, and the total capital you owe secured against your property.
Sensible non?
Plus "affordability" means can you afford it if interest rates go up, remember they are at historic lows. They have to stress test your finances.
If I was them I would want all your debts cleared, and the total capital you owe secured against your property.
Edited by Soov535 on Wednesday 29th July 12:19
CSLchappie said:
we could still afford to pay the mortgage if we saw rates go up to 4-5% as they were 10 years ago.
Someone obviously disagrees or you wouldnt be having this problem.42% of monthly (presumably take home?) money is actually a hell of a lot for a mortgage id say too. Perhaps im out of touch though.
Sure I get that.
But they will take this view because their exposure to you will be much less once they have all your debtsa with them secured against the property. The have virtually zero exposure.
But they will take this view because their exposure to you will be much less once they have all your debtsa with them secured against the property. The have virtually zero exposure.
CSLchappie said:
We have a good income and plenty of cushion in longer term savings, we'll also have over 40% equity in the property - its not like we're first time buyers who are struggling to put a deposit together and while I don't think it that likely we could still afford to pay the mortgage if we saw rates go up to 4-5% as they were 10 years ago.
Sarnie, yes the higher monthly cost is smaller mortgage with car finance still in place, around £200pcm higher. I appreciate different lenders will have different criteria for 'affordability' but there does seem to be a substantial gap with Lloyds, as I said been vetted by another high street bank with no problems, we were also pre-approved by an IFA as a prerequisite to putting the offer in on the new house, again no issues, affordability perfectly fine and we could have taken out a much higher mortgage (albeit over a longer term) if we wanted.
Sarnie, yes the higher monthly cost is smaller mortgage with car finance still in place, around £200pcm higher. I appreciate different lenders will have different criteria for 'affordability' but there does seem to be a substantial gap with Lloyds, as I said been vetted by another high street bank with no problems, we were also pre-approved by an IFA as a prerequisite to putting the offer in on the new house, again no issues, affordability perfectly fine and we could have taken out a much higher mortgage (albeit over a longer term) if we wanted.
Soov535 said:
Surely they are protecting their position by making you clear your debts and having one big secured loan with them so that if you default they can repo.
Sensible non?
Plus "affordability" means can you afford it if interest rates go up, remember they are at historic lows. They have to stress test your finances.
If I was them I would want all your debts cleared, and the total capital you owe secured against your property.
Sensible non?
Plus "affordability" means can you afford it if interest rates go up, remember they are at historic lows. They have to stress test your finances.
If I was them I would want all your debts cleared, and the total capital you owe secured against your property.
Edited by Soov535 on Wednesday 29th July 12:19
It seems to come down to either jumping through the hoops that Lloyds require to secure the mortgage, or to take out a mortgage with a different bank, who, as you say have pre-approved you. I appreciate that you've mentioned the £5k penalty for ending the current mortgage early, therefore you need to weigh up which option is most beneficial to you.
Mortgage is 31%, add cars then its 42%. I'll re-iterate that Lloyds didn't see that as a problem last year when they provided the money for one of the cars... which is the issue that's most annoying now.
I've always been paying somewhere between 30-40% of my take home into a mortgage, I'm comfortable with that level of repayment and I know many friends pay a similar percent too.
I've always been paying somewhere between 30-40% of my take home into a mortgage, I'm comfortable with that level of repayment and I know many friends pay a similar percent too.
p1stonhead said:
Someone obviously disagrees or you wouldnt be having this problem.
42% of monthly (presumably take home?) money is actually a hell of a lot for a mortgage id say too. Perhaps im out of touch though.
42% of monthly (presumably take home?) money is actually a hell of a lot for a mortgage id say too. Perhaps im out of touch though.
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