Remortgage for my Mum

mancitychick

My Mum is looking to remortgage as she is with Legal & General paying interest at approx 6.5% :eek: She was going to go for the Nationwide 5 yr fixed (she wants interest only). Her house is worth approx 250000 and she is looking to borrow 113000 however after her appt with nationwide they told her that for interest only mort from them they must be at least 150k of equity - based on the above figs there is only 137k. However they did say sometimes mortgages go through with less than the 150 but other times they don't and to apply and see what happens

So now not sure what to do as if she applys and they turn her down, will this not reflect badly when she finds a diff lender. Also I find the advice from the n/wide advisor to be a bit vague, surely they is a clear cut rule?

Any advice would be approeciated. Should see apply for n/wide or if not any other suggestions for 113k over 14 years interest only. 3/5 yr fixed.

Thanks

MortgageMamma

I've never had nationwide tell me that mortgages on an interest only basis have to be on 150K equity for interest only and I've place 3 interest only cases with less equity than that with them in the last 2 months. I'd ring the branch you went to and double check, I think maybe the advisor wasn't clear enough in their explanations.

Another option is to see or speak on the phone with a whole of market mortgage advisor who can put you right on this, and may even be able to find something more competitive.

Lisa

payless

MortgageMamma wrote:

I've never had nationwide tell me that mortgages on an interest only basis have to be on 150K equity for interest only and I've place 3 interest only cases with less equity than that with them in the last 2 months. I'd ring the branch you went to and double check, I think maybe the advisor wasn't clear enough in their explanations.

Lisa

Its all around their intrepretation of "responsible lending "

Its in their lending guide ( also on intermediary website - I won't post link here as its not for public use, albeit its not password protected)

Our Interest-only Borrowing Policy

As part of our commitment to responsible lending, Nationwide will need to know how your clients intend to repay any interest only borrowing they are taking with Nationwide. Nationwide will accept a number of repayment vehicles which are detailed below:

• ISA
• endowment policy
• pension plan
• existing PEP
• sale of second property
• sale of main residence

The following details will be required for investment based repayment vehicles; there are fields on the application forms for you to enter this information into:

• Latest estimate of maturity value
• Policy start date
• Policy maturity date
• Monthly cost
• Policy provider

Unfortunately, there will be some cases where Nationwide cannot accept your client's repayment method as it will not meet our responsible lending requirements. Sale of property to repay capital will be subject to restrictions. If the property is your client's main residence, the property must have £150,000 equity and borrowing must not exceed 66% of the value of the property. If the repayment vehicle is a second property, equity in that property must be at least 120% of the new mortgage that it is intended to cover. The property must be owned only by your client(s).

Obviously I don't know enough to comment on this ( or the other cases MM placed) but lenders and brokers are being told to be careful over recommending / allowing interest only lending.

A lot of case recording is taking place and the regulators will now doubt be collecting info on which lenders/ brokers are dealing in higher risk business (pure I/O , self cert, sub prime) and IMO likely that these firms will be subject to a closer scrutiny ( thats not to said the advice is wrong in all cases )

also see http://www.learnmoney.co.uk/advice/advice-44.html

stanmoresaver

An excellent link- Thanks Payless!

MortgageMamma

the industries going mad - to the degree that people cannot make their own choices with regards to how they repay their mortgage at the end of term, I can understand a low LTV to protect a lender in the event of house price inflation/deflation but I can't understand the £150k bit? Is it just me that feels this is a severe?

MortgageMamma

but fantastic post thanks payless

payless

Yes does seem a little overkill on the £value element, will likely find each lender will interpret the "rules" differently

More worrying is

1. Whats the point in having rules if some of the processing teams are not picking it up / all singing the same tune - don't know how long thius actual rule been in place (but at least since 10/1/06 )

2. If a client does want I/O- It will always be the broker that will take the flax if it goes wrong ( might even be classed as mis-selling) , so if not happy recommending really must decline the the business.

stanmoresaver

MortgageMamma wrote:

the industries going mad - to the degree that people cannot make their own choices with regards to how they repay their mortgage at the end of term, I can understand a low LTV to protect a lender in the event of house price inflation/deflation but I can't understand the £150k bit? Is it just me that feels this is a severe?

But unfortunately, in this lititious(?) world, they will be the ones that will sue anyone they can. It's severe but unfortunately inevitable that interest only loans, (because people would rather live now, pay later, and hope that "mummy and daddy" will leave them enough to pay off their loans) will come under further scruitiny.

mancitychick

Any advice/suggestions please? Have ruled out n/wide as my mum does not have endowment/pensions to clear morg as per n/wide requirements. (She will eventually inherit her mums house & the sale of this will generate more than enough to clear the 113k when it becomes due)

HelpWhereIcan

Unfortunately, there are not many lenders that will accept an interest only loan with no investment vehicule to back it up.

Will have to do some checking, but as far as I remember, Abbey will accept sale of property. There wil be other lenders, but do not have all I need to make sure (even I am not sat in the office at this time of night )

I would suggest that your mum needs to talk to a whole of market broker who can assess her needs and circumstances against the deals and lenders available.

Hope this helps

mancitychick

HelpWhereIcan wrote:

Unfortunately, there are not many lenders that will accept an interest only loan with no investment vehicule to back it up.

Will have to do some checking, but as far as I remember, Abbey will accept sale of property. There wil be other lenders, but do not have all I need to make sure (even I am not sat in the office at this time of night )

I would suggest that your mum needs to talk to a whole of market broker who can assess her needs and circumstances against the deals and lenders available.

Hope this helps

Thanks. I thought as it is a house other than the one the mortgage is on, that will be sold to clear the o/s bal, it might of made a difference. Will suggest her look for broker, but it will just mean her picking one out of the phone book unless there is some sort of approved list that she should be choosing from?