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?
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!
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.
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.
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.
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
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.
But its not 42% - its 31% and we have various provisions for those circumstances, one of which under the bank's request would be significantly reduced... i.e reducing our fast access savings, and I'll reiterate the point about having a significant chunk of equity in the house.
The affordability issue needs to be put into perspective, even after all our commitments are met we have a substantial amount of money left over each month, 30-40% of net household income on a mortgage may be a stretch for a household earning 25-30k, for my circumstances its not.
The affordability issue needs to be put into perspective, even after all our commitments are met we have a substantial amount of money left over each month, 30-40% of net household income on a mortgage may be a stretch for a household earning 25-30k, for my circumstances its not.
Soov535 said:
And that's the crux of it.
If one of you loses their job or gets ill, you're going to be screwed.
The Bank want to ensure that if this happens then they are not fixed with an exposure which isn't secured.
If one of you loses their job or gets ill, you're going to be screwed.
The Bank want to ensure that if this happens then they are not fixed with an exposure which isn't secured.
Cheers, the frustration comes from the fact that the offer for a mortgage in principal was made prior to buying (with all cards on the table in terms of finances) now we've bought they've decided to roll out these extra conditions without ANY chance discussion, as I've said we could structure it so that we borrow less but they aren't having any of it, it all feels one way into heaping more borrowing onto us via the mortgage at a lower LTV than needed.
The bank have now confirmed that the cars will need to be paid off prior to completion so that pretty much kills the deal. There is a silver lining though, we have another buyer whose offer is 10k higher than the one we accepted, so if our original buyer walks its not the end of the world.
The bank have now confirmed that the cars will need to be paid off prior to completion so that pretty much kills the deal. There is a silver lining though, we have another buyer whose offer is 10k higher than the one we accepted, so if our original buyer walks its not the end of the world.
Wacky Racer said:
The fact is the bank hold all the aces, they can impose whatever terms they wish.
Gone are the days when banks/building societies were an easy touch dishing out mortgages left right and centre. They have had their fingers burnt too many times.
You may not think so now, but as well as protecting themselves they are trying to protect you in case your personal circumstances change in the future.
People can and do lose their jobs for whatever reason.
Good luck anyway, and I hope you eventually purchase the house....
Gone are the days when banks/building societies were an easy touch dishing out mortgages left right and centre. They have had their fingers burnt too many times.
You may not think so now, but as well as protecting themselves they are trying to protect you in case your personal circumstances change in the future.
People can and do lose their jobs for whatever reason.
Good luck anyway, and I hope you eventually purchase the house....
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