Refused mortgage because....

Ivesy321

I still can't believe this one. Me and my Fiance are in the process of buying a new house. We've been shopping around for the last few weeks looking for a decent fixed priced mortgage.

At long last week found what we thought was the best available on offer.

Which was a 5 year fixed rate with the BRITTANIA building society. We completed online and all seemed fine until today, we got a letter which reads "Thank you for your application for a mortgage at the above property. Unfortunately we are unable to assist with your purchase on this occasion as we do not lend on NEW BUILD PROPERTIES"!!!!

We were absolutely staggered by this. There still isn't anything on the website which mentions this. I could understand if we had poor credit ratings or had poorly paid risky jobs or were asking for more that a 75% mortgage but none of these apply.

The other annoying thing is we probably have both been credit scored and since we are looking to get another mortgage elsewhere we are worried this might have an adverse affetct on any morttgage appliactions in the (very) near future.

I've tried ringing them today but they aren't answering so I've sent an email to ask why buying a new build house is such a problem!

Does anyone out there know why this has happened and is it common?

Thanks

borosteve_2

At a guess it may be that the price of new builds are so subject to flux in the market? .

One of the lads I work with had gone to see some news builds that were on the market for £325k six months ago and had just been reduced to £265k. When he was in there he heard another couple being told that their offer of £225k had been accepted! So 100k off in six months and that may not be the end of it. Maybe they're nervous of almost instant negative equity?

I'm not an expert, its just a guess.

hostman

It's because new builds are notoriously overpriced.

I wouldn't buy one unless I could at least buy it for -30% their asking price.

JayZed

There is certainly a higher risk with new build properties, especially flats, and it's common for mortgage lenders to have different terms for new build properties.

Britannia's policy on new build properties is clearly stated on its website:

In most cases, you can borrow up to 90% of the purchase price or valuation for the property. However, for houses and bungalows built within 24 months of the date of your application, the maximum Loan to Value (LTV) is 85%. Please note that we will not accept any applications for flats, apartments or maisonettes built or converted within the past 24 months.

http://www.britannia.co.uk/unison/mortgage/fixed/5_year/important_information.html

So if the property you've asked to borrow on is a flat or maisonette, they're clearly not going to offer you a mortgage. If it's a house, it might be worth calling them and clarifying the situation.

If you have to look elsewhere, I wouldn't worry about the credit scoring issue - one mortgage application isn't going to have a significant impact on your credit score.

borosteve_2

The Op does say house though and that they were not looking for more than 75% of the value .

herbiesjp

A lot of lenders have indeed decreased the maximum LTVs on new builds in the current climate.

However at 75%, or less, you should have plenty options assuming you meet the other criteria of the lenders i.e. income multiples etc

Ivesy321

Thanks for the replies at least it sheds a bit of light on why we were refused. Will give them a ring tomorrow to find exactly why though!

epz_2

its pretty simple, if you look at the deals many new build places offer such as free fees, white goods, carpets, cashback, cars, 25% interest free loans etc a bank has no way to baseline what the actual bricks and morter of a place is worth.

you may well be buying a standard place but plenty arnt, as a sobering thought there are a lot of repo flats up my way not selling at auction for 65k-70k that were bought new for 225k. in the current climate the last thing a bank wants is that kind of liability on its books.

depurnell

Before you start looking at alternative lenders I would strongly recommend that you speak to a Whole of Market Mortgage Adviser.

The internet is great for showing what the best deals are but it does not tell you about the small print and any exclusions.

To ensure that you do not end of paying for another survey or having another credit score against your name, a mortgage adviser can make sure that your next choice is the right one.

There are a number of reputable companies that will lend on new build properties with a 25% deposit.

Kind regards,

Damian Purnell
Mortgage & Protection Consultant