Abbey Right to Buy mortgage declined

adypearson

I'll give you the short version of our 18 month emotional rollercoaster! We are first time buyers.

1) Wife, son and I moved into our 2-bed council house June 2008. House needed a lot of improvements due to bad maintenance from previous tenant. We decided to use our right to buy and contact a recommended mortgage broker. We explain we need a home improvement loan of £10k on top of our mortgage, for all the work needed.
2) Lots of delays at every step of the way from council, mortgage lenders, surveyors, drainage companies and valuers due to a crack on rear wall of property. This then gets sorted out. Subsidence is eventually ruled out.
3) Eventually after 16 months get offered a mortgage from RBS, but on reflection decide monthly payments are too high with the home improvement loan included on top. Decide to get home improvement loan seperate from the mortgage to save on interest, after advice from broker.
4) Mortgage broker then recommends a very attractive Abbey product, 2 yr fixed at around 3% - meaning our monthly payments would only be £100 more than our rent! We then get very excited for the first time.
5) Abbey decline our application - reason given - 'loan not afforable'!! Our joint income is around £50k a year, we have no bad credit history and it's only £100 more than our rent per month!

My questions are:
1) how can they turn us down?
2) Where do we go from here? RBS want to charge us arrangement fees of £1998 if we change from their original mortgage offer!!!

_Andy_

You've already answered question 1) - i.e. they've declined you due to you failing their affordability model.

adypearson

but how can they say we can't afford a mortgage that's only £100 more than our rent, we have shown in the application how we can easily afford it?

what are they basing their decision on?

_Andy_

They have an affordability calculator which takes into account your outgoings etc. It's one of the more generous ones.
Unfortunately it's not based on whether you find it affordable.

ViolaLass

I don't understand - you decided that mortgage+home improvement extension to mortgage was too expensive but getting a home improvement loan worked out cheaper? I would have thought that an unsecured loan would be more expensive, not cheaper.

adypearson

that's what we were advised by the broker, over the course of the mortgage it would be more expensive to have the £10k on top of the mortgage

and thanks Andy for your sarcastic comments - really appreciated

ViolaLass

The broker means that you would pay more interest on the loan as you would take longer to pay it off (presuming that your mortgage is set to run for longer than you plan the loan to run for).

HOwever, if you plan to get a loan separate from your mortgage, surely that makes your monthly payments higher than if the loan were included with the mortgage, which might be why you've been declined.

e.g. mortgage of £100k and loan of £10k - if the loan is over, say, 3 years and the mortgage over 10, then you will pay the loan off much more quickly but while you're paying it, the amount of money you spend per month on debt will be higher. (I've made the numbers up as you haven't given them). If you gave the actualy figures, it would be possible to see if I'm right.

_Andy_

adypearson wrote: »

that's what we were advised by the broker, over the course of the mortgage it would be more expensive to have the £10k on top of the mortgage

and thanks Andy for your sarcastic comments - really appreciated

I haven't made any sarcastic comments (ironically you just have - see above). I'm just pointing out that whether you feel it's affordable isn't relevant, it's always down to the lender, who will each have different lending criteria.

As you've been quite rude I'll step out now rather than attempt to help further.

P.S. you may want to look up the definition of sarcasm.