New Mortgage Rules - Existing Customers

[uuf361]

I have friend, yes it's really not me, who decided he wanted to change his mortgage over today.

Has had an interest only product for 8 years with his lender and no issues, but has decided he wants to move to repayment over the remaining mortgage term.

Called to get rates and picked one (monthly payment about 20% more than current interest only deal but he can afford it), calls back to switch and is told he has to go through the process as if he was a new customer, pay slips, affordability etc.

Does this seem right ? He is, somewhat bizarrely, unlikely to be offered the amount of his existing loan if he goes through the process, even though he has been paying it for the last 7 years.....

[Magic919]

I'm not surprised. Whether it's right, depends on what you mean. I'd say it's a correct application of the new rules.

[gjf764]

It makes some sense I guess, can he not just work out the repayment profile himself and overpay if his existing product will let him? This way he gets the benefit of the capital repayment with no grief and the option to revert to interest only if his world falls apart in the future

[uuf361]

Yep he can and that's what I've advised him.

However the new rate was more than 2% lower so equated to the capital bring paid off significantly quicker, in fact the lower rate was saving £500 in interest alone, so just a shame it'll take so much longer to pay off this way....

[gjf764]

uuf361 said:

Yep he can and that's what I've advised him.

However the new rate was more than 2% lower so equated to the capital bring paid off significantly quicker, in fact the lower rate was saving £500 in interest alone, so just a shame it'll take so much longer to pay off this way....

In that case maybe he should put up with the pain!

Being cynical he should ensure that he won't surreptitiously be 'reassessed' for his existing mortgage and suddenly asked to repay it

[JungleJim]

can't he try going to another lender - or go to a broker/financial advisor. If they even save him 1% thats £250 a month which wouldn't take too long to cover the fees

[Sarnie]

uuf361 said:

I have friend, yes it's really not me, who decided he wanted to change his mortgage over today.

Has had an interest only product for 8 years with his lender and no issues, but has decided he wants to move to repayment over the remaining mortgage term.

Called to get rates and picked one (monthly payment about 20% more than current interest only deal but he can afford it), calls back to switch and is told he has to go through the process as if he was a new customer, pay slips, affordability etc.

Does this seem right ? He is, somewhat bizarrely, unlikely to be offered the amount of his existing loan if he goes through the process, even though he has been paying it for the last 7 years.....

If the committed payment is going up then the affordability has to be assessed under the current regulations, they can't apply previous underwriting criteria.

[bigtime]

I presume if one has 10-20 years left on a mortgage and never missed a payment and doesn't wish to over or under pay the bank can't suddenly take the mortgage off you?

[uuf361]

Sarnie said:

If the committed payment is going up then the affordability has to be assessed under the current regulations, they can't apply previous underwriting criteria.

Yep, I guess that does make sense.

I've advised him to ask them if they'l let him move to the new rate on a part repayment/part interest only basis keeping the payment at the current level thereby getting him the benefit of the much better rate and then being able to make overpayments (up to 105 of balance each year) - might be a non-starter but worth asking the question.

[rfisher]

So what happens with 'portability' of an existing mortgage and the new regulations?

Are lenders going to stick to the existing agreement if you move and want to take your current deal with you?

Or will they insist on checking out how much SHMBO spends on batteries every month?

[illmonkey]

rfisher said:

So what happens with 'portability' of an existing mortgage and the new regulations?

Are lenders going to stick to the existing agreement if you move and want to take your current deal with you?

Or will they insist on checking out how much SHMBO spends on batteries every month?

Going to my current mortgage company to port it, and I had to go through affordability and a 'soft credit check' (no mark on my record). But, they said they'd not want pay checks etc as I was already paying. So I could have just made a salary up. Seems very strange. They wouldn't lend us enough anyway, so we went with a new company.

The whole thing is stupid. My mortgage is low, so with the extra cash, we enjoy our selves, go on holidays and spend plenty going out. If our mortgage goes up (when we move) we'll of course cut back. Surely they should just take the mortgage payment and factor in an average for bills, then see how much is left. If it's £10, of course it's too much, if it's reasonable, they go for it.

[Stevemr]

Portability is and has always been subject to client lending criteria at point of change.

[BoRED S2upid]

This could bite a lot of people when their current deal comes to an end and they wish to change lender or rate. A lot of people still out there on 100% deals or interest only.

[Sarnie]

rfisher said:

So what happens with 'portability' of an existing mortgage and the new regulations?

Are lenders going to stick to the existing agreement if you move and want to take your current deal with you?

Or will they insist on checking out how much SHMBO spends on batteries every month?

What a lot of people don't realise is that when you port your port, you don't simply just transfer the rate and balance to a new property and that porting the mortgage is automatically going to be acceptable to the lender.

What actually happens is that you have to redeem your current mortgage and then re-apply for your own mortgage essentially plus any additional borrowings. You then normally have to comply with whatever the criteria is at that point in time, not what you had the mortgage agreed under previously. So if your credit score has taken a hit, you had a salary reduction, increased your unsecured debts or have just gone self employed etc, you could come unstuck.

You will normally incur your ERC if you have one, with it being refunded if you complete on your next property within 3 months.

[Jacobyte]

Asking the existing lender for a straight rate change is likely to be the easiest way. Overpayments can always go into a separate savings vehicle such as an ISA.
I’ve just done that with my IO mortgage and not needed to do a full application.