arranging a mortgage via a 'broker'.

free4440273 · 9 May 2006 at 12:56PM

i need some information about getting a mortgage via a 'broker'. a friend of mine and his partner earn approximately 40k between them. obviously, given their measly income, they cannot possibly arrange a mortgage via a bank/building society, so they were thinking of going through a broker. what are the pitfalls involved (apart from the extortionate interest rates!) and indeed would a broker even consider arranging a mortgage for them . they are considering buying a property with a value of between 400 - 500k. if it helps any, they do have a substantial deposit, about 60K. thanks all

would really appreaciate the advice on their behalf.

payless · 9 May 2006 at 1:09PM

I don't think £40K is measly- surely thats about UK household average

Mortgages from a broker will end up with a bank/ BS or finance company anyway.

BUT on this little / third hand info - I don't think they are liekly to raise ( or afford) the min £340K they want -

average income - wanting an above average mortgage

homer_j_3 · 9 May 2006 at 1:11PM

Hi

Im not sure if a broker would be much help here either to be honest?

If your friends have a 60k deposit and want to buy a 400k property(min) they will require a mortgage of 340k

the rule of thumb is about 3 x joint salary, although possible to go higher, it is not always wise. Especially at property values of this size. A 1% increase in interest rates will be quite expensive.

If they went for a mortgage at 4 x joint salary then your friends would be looking at a property price of about 220k.

They will also have to consider stamp duty and all the costs involved too.

HGLTsuperstar · 9 May 2006 at 1:14PM

They dont have a measely income at all, but they do have either their heads in the clouds/misjudgement as to what property they need etc, if they are looking in that price bracket. Of course having a 60K deposit helps, where are they looking, in most areas that's 30% of the LTV for a decent place

free4440273 · 9 May 2006 at 2:37PM

ok thank's all. i will give them the bad news asap. also, i forget to mention earlier: what if a third person (again earning approx 20k) bought the property with them (so 3x salaries). clearly, i misunderstood: i thought brokers would be far more generous. i have done the calculations myself: ironically, they could afford the monthly repayments (on say a 10 year fix at 4.8 per cent on a property valued between 400 to 500k) and even more ironic they have a substantial deposit of 60k. failing that, i will let them know the bad news. thanks all - any other help or ideas would be appreciated

payless · 9 May 2006 at 2:42PM

no brokers aren't more generous ( its not their money), but will know which lenders have different criteria that might help in some cases, just seems that ( based on the information supplied here) they won't likely meet the most relaxed ( or imprudent - depends how you look at it ) criteria

TangentMan · 9 May 2006 at 2:48PM

Brokers introduce business to lenders. It is the lenders money and their rules that must be followed.

Brokers can find those lenders with the most flexible affordability rules, or perhaps help with self certification if your friends want to go that way.

but your friends need to be happy that they can not only afford the payments, but that they can enjoy the lifestyle that those mortgage payments will force upon them.

And if you find people wanting to lend at high income multiples , remember that they have the security of being able to take possession of the property if it goes wrong.

free4440273 · 9 May 2006 at 2:52PM

payless wrote:

no brokers aren't more generous ( its not their money), but will know which lenders have different criteria that might help in some cases, just seems that ( based on the information supplied here) they won't likely meet the most relaxed ( or imprudent - depends how you look at it ) criteria

thanks. i think i understand what you mean by 'relaxed' or 'imprudent'. let me put it this way. just imagine this scenario: if they were able to afford a mortgage of this size then i would recommend a ten year fix (Nationwide is currently doing 5.04 per cent). By 'imprudent' do you mean the 'best' they would get via a broker is something absolutely extortionate, like 10 or 12 per cent!! if that is the case, then i would run a mile myself. i know i am asking you to make a judgement call here, so apologies for that

payless · 9 May 2006 at 3:01PM

I used the term imprudent lending as an alterative view to relaxed lending criteria , not rate

Based on someone with a fixed provable income, As far as I know -the lenders that are likely to lend higher multiples ( or higher on affordability based ) are still going to be the mainstream lenders , on competitive rates ( no loading for going higher)

free4440273 · 9 May 2006 at 3:12PM

i see. so the bottom line is this: even though they have a deposit of 60k, and there are three salaries involved (at 20x3 salaries), they are unlikely to get a mortagage via a broker. just one other factor i forgot to mention - and i am not sure how brokers would consider this, if indeed at all. the couple have large substantial savings (£200k) tied up in a totally risk free building society bond (no not a GEB, just an ordinary risk free bond) for three years: it pays them approx £800 per month in 'income'. would a lender/broker consider this as a regular form of income. sorry to be rude, but no i don't need suggestions about using some or all of that money towards a bigger deposit. for personal reasons, they do not want to touch that money - it pays them a good 'income' and that income will probably rise as savings rates rise. as the bond matures, they will simply reinvest the money into another risk free bond. thanks all.

payless · 9 May 2006 at 3:18PM

investment income will be considered by some lenders , but even then we seem to be a short of their requirements ( complicated by asking for a 3 person mtg and investment income)

I won't go the route of saying encash the b/s investment then - lets hope its paying a higher rate ( net of taxes ) than their mortgage rate would be

arranging a mortgage via a 'broker'.

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