Trying to downsize but Nationwide won't lend us less money!

tinkerbell12

I am after some advice if anyone could please help....

We are currently in a fixed term with Nationwide of around 5% but as you can see from signature, recently entered a Debt Management Plan as we were struggling to meet monthly bills and living on credit.

We decided that downsizing could be one way of getting back on track with our finances and rang Nationwide asking for figures on borrowing £32,000 less (as we have found a house that means no stamp duty, smaller utility bills, near to work so could lose one car etc etc) They had to re-credit check though and surprise surprise we failed the check. Conclusion - they won't lend us less money than they do now!

We tried writing to the underwriters but they still refused and Nwide would give no explanation...

Our fees to get out of our fixed rate are £4500 and we would then have to pay a higher % rate if we switched provider (esp due to credit problems although had credit file checked and are still relatively good as we never missed payments.) Looks like moving provider does not make financial sense either...

Has anyone had a similar situation with a bank/building society and had any joy??

dunstonh

The lender has no requirement to port your mortgage to a new property. Especially if the security of the proposed alternative is not as good as they already hold and you no longer meet their current lending criteria.

What is the loan to valuation on your current property and what is it on the proposed property?

tinkerbell12

Thanks for your swift reply...

LTV - 95% on our current property and we hope to also put down 5% on new property too so would be the same.

I completely appreciate that they are under no obligation - Nationwide made that very clear to me on the phone! I just think if we reduce our mortgage, surely we are less of a risk to them?

Would we have a better chance if we could lower our LTV on new property? Is there another department within Nationwide where we can plead our case?

Cat695

tinkerbell12 wrote: »

Thanks for your swift reply...

LTV - 95% on our current property and we hope to also put down 5% on new property too so would be the same.

I completely appreciate that they are under no obligation - Nationwide made that very clear to me on the phone! I just think if we reduce our mortgage, surely we are less of a risk to them?

Would we have a better chance if we could lower our LTV on new property? Is there another department within Nationwide where we can plead our case?

You must understand the banks don't want you to reduce your mortgage because they'll make less money out of you.......no matter how nice they may be at the end of the day they just want your money like every other company.......god forbid that a bank should actually see sense and help you!!

opinions4u

If I was underwriting a mortgage for a high risk customer who was only putting down a 5% deposit, I'd ask myself if it would be preferable to lose the business to another lender than take the risk myself.

This is what has happened.

While there are no guarantees, you need to establish whether they would lend if you reduced their risk with a 10%, 15% or even 25% deposit.

Then you're on to broker territory and need to be careful you don't get fleeced for excessive fees.

ukukdays

Keep bugging them, remention the fact you can't afford your current mortgage..

getmore4less

I think the key problem here is the 95% LTV. in a dropping market this is not enough these days.

Did you ever do and post a SOA? I don't see one.

If struggling on a DMP you are paying out too much.

I assume you are allready on interest only for the mortgage?

Looking at the numbers with some guessing.

Lets say your new house is at the SD limit £175k 95% is £166250(£8750equity), old house +£32k mortgage is £198250 95% so around £208k(10k equity).

This means you are releasing £1250 equity, can you make this move for just over £1k selling and buying costs even without the SD?

Ok this will reduce your outgoings a lot, mortgage saving is £160pm + all the other savings, so is worth trying, but it does not look like you have enough equity to pay for the move.

Can you rent in the new location for say around (£166k@6%) £830pm, this will free up the full £10k less the costs of selling, which you can then reajust your plans.

It might be better to rent make all the other savings get back on track and then consider buying again.

koexelek

Although virtually all lenders will port a mortgage scheme with no problems at all, the new mortgage will be tatally underwritten as a brand new application.

As criterias have tightened so much now, it is quite conceivable that a lender will not now lend on a situation they would have done a year ago,

dunstonh

The problem, is mooted above, is that the new purchase is treated as a new application and that fails current lending criteria with the Nationwide. You need more than 5% with them.

Tiddler_2

Whilst I think the 95% LTV is an influencing factor, the main problem here will be that you have/are in a DMP - Nationwide generally will only deal with squeaky clean customers - so it is failing their credit score.
Getting an underwriter to use common sense and put his name to a case outside their official policy at the moment is very unlikely!

getmore4less

See my other post if these numbers are anywhere close then I think the main problem is they cannot afford the move even if they find a lender.

There is not enough equity being released to pay for the move.