95% newbuy mortgage

Thrugelmir

The_J wrote: »

Plus, all the bad mortgage brokers have gone. It's happened and I'm still here and stronger than ever.

In my experience those that boast never actually what they appear or say they are.

The_J

Thrugelmir wrote: »

In my experience those that boast never actually what they appear or say they are.

I'm proud of what we've done, what we've established and the effort the boys and girls have put in over the last 5 years. Goes to show that British people can make something of themselves despite the attempts of the majority to drag us towards communism.

squeeks

The_J wrote: »

By your logic squeeks anyone with debt shouldn't be allowed a mortgage? But a mortgage is just debt? The credit cards could have been for home improvements and the drop in house value wiped that out? It could have been to pay for something for someone in need but because of their income situation (underspend) they volunteered to do that for them. So many reasons, to suggest that someone in debt is financially irresponsible is disgraceful.

Hey, I'm just trying to figure out what the requirements are. I was under the impression that you needed a deposit to secure a mortgage to purchase a house. Also that the deposit had to be cash you could give to the bank as opposed to your favourite goat.

I also naïvely thought that LTV had been put in place to ensure individuals have a certain financial stake in their property, that wasn't sourced from credit.

Take this example. Mr Smith has 10k in the bank and wants to build a conservatory on his house.

Mr Smith can
i) Borrow 10k to build the conservatory and service the debt he takes on.
ii) Buy the conservatory outright.

The house does not change in value as a result of Mr Smith buying the conservatory (it didn't go down either!). But ii) is typically the more financially prudent option as interest on credit is typically lower than interest paid on debt.

Mr Smith now wants to move.
If he took option i) Mr Smith has 10k cashflow and 10k debt to borrow 90k for his new house, providing 90k + 10k is less than 4.9% of his income the mortgage company will accept his money and lend him the 90k.
If Mr smith took option ii) Mr Smith would not be able to move as he doesn't have a deposit.

In both scenarios Mr Smith spent 10k, but only if he borrowed a further 10k could he get a mortgage.

What I am trying to say is it doesn't matter what the borrowing is for, it should be counted against the available deposit, otherwise you're borrowing money (loan, CC etc..), to allow you to borrow money (mortgage).

If this isn't how it works then the system has to be broken as it encourages people to take out loans or take on debt to obtain a mortgage.

Are you sure that debts get taken from the income multiple, rather than the deposit?

The_J

squeeks wrote: »

Hey, I'm just trying to figure out what the requirements are. I was under the impression that you needed a deposit to secure a mortgage to purchase a house. Also that the deposit had to be cash you could give to the bank as opposed to your favourite goat.

Yes apologies I am being harsh towards you but it's only because Thrugelmir !!!!es me off so much.

Take this example. Mr Smith has 10k in the bank and wants to build a conservatory on his house.

Mr Smith can
i) Borrow 10k to build the conservatory and service the debt he takes on.
ii) Buy the conservatory outright.

Of course it is better to pay from savings. Banks generally charge more for debt than pay for savings. But why wouldn't the house increase by 10k? He has paid 10k for nothing? If house prices drop then yes, he invested 10k in equity and lost it. Tough luck, if he got it on credit he still owes the money (more in fact when factoring in interest)

Mr Smith now wants to move.
If he took option i) Mr Smith has 10k cashflow and 10k debt to borrow 90k for his new house, providing 90k + 10k is less than 4.9% of his income the mortgage company will accept his money and lend him the 90k.
If Mr smith took option ii) Mr Smith would not be able to move as he doesn't have a deposit.

Yes, in option 2 Mr Smith invested in property and lost out. If he bought 10k in Northern Rock/Lehmann Brother shares he'd be in exactly the same situation.

In both scenarios Mr Smith spent 10k, but only if he borrowed a further 10k could he get a mortgage.

For many lenders yes, but he still had "20 grand".

If this isn't how it works then the system has to be broken as it encourages people to take out loans or take on debt to obtain a mortgage.

Are you sure that debts get taken from the income multiple, rather than the deposit?

Quite sure. What's the problem with a deposit coming from a loan? It's exactly like the example you state. Who cares where the money comes from as long as it can be repaid? Mr Smith needed 20k to do what he wanted, he !!!!ed up and lost 10k investing it in his property but he's still got 10k.

Using debt is more costly than using savings and that's why it doesn't make much sense doing it but if it's affordable and it facilitates a life investment why not?

squeeks

The_J wrote: »

Using debt is more costly than using savings and that's why it doesn't make much sense doing it but if it's affordable and it facilitates a life investment why not?

Okay, so by borrowing a deposit, you effectively create a 100% plus mortgage. 100% mortgage is a risk to the lender in a declining market, should the lender have to foreclose, so less than 100% reduces their risk (unless they also loan you the money through another product!)

For the consumer the LTV should only be an issue if they:
1) want to move and don't meet LTV requirements for the new property (otherwise it is all relative)
2) want to change lenders and rates depend on LTV
[STRIKE]3) MEW[/STRIKE]

Humm....
Yes, the ability to repay is important and interest rates are more likely to rise than fall at the moment. It's a sticky point really taking on probably the largest debt in your life, on a variable interest rate, that could easily double within the lifetime of the loan.

Tricky...

Thrugelmir

The_J wrote: »

Yes apologies I am being harsh towards you but it's only because Thrugelmir !!!!es me off so much.

Grow up then and stop throwing your toys out of the pram. Just because people have the audacity to hold a different point of view to yourself.

The_J

squeeks wrote: »

Okay, so by borrowing a deposit, you effectively create a 100% plus mortgage. 100% mortgage is a risk to the lender in a declining market, should the lender have to foreclose, so less than 100% reduces their risk (unless they also loan you the money through another product!)

No, the mortgage is 90%. That's what the lender can reclaim from the sale of the property.

The loan is unsecured, you could not pay it back and they can't do much about it. As such it is higher risk and you'll pay a higher rate of interest (as leveller described on the international stage). You could do that whether you have a mortgage or not.

Yes, the ability to repay is important and interest rates are more likely to rise than fall at the moment. It's a sticky point really taking on probably the largest debt in your life, on a variable interest rate, that could easily double within the lifetime of the loan.

Affordability is usually based on a higher interest rate, 5-6%.

The_J

Thrugelmir wrote: »

Grow up then and stop throwing your toys out of the pram. Just because people have the audacity to hold a different point of view to yourself.

I'm happy with different opinions. I draw the line at right and wrong.

squeeks

The_J wrote: »

No, the mortgage is 90%. That's what the lender can reclaim from the sale of the property.

The loan is unsecured, you could not pay it back and they can't do much about it. As such it is higher risk and you'll pay a higher rate of interest (as leveller described on the international stage). You could do that whether you have a mortgage or not.



Affordability is usually based on a higher interest rate, 5-6%.

The lender will try to recoup the entire outstanding portion of the mortgage debt, regardless of the current house value or the LTV of the loan, oh the joys of recourse loans. The personal loan provider will come after you separately.

First direct are offering personal loans for 6.1% (representative) for 7 - 10k. Some of the Natwest 10% deals using the OP figures were 6.09% during the fixed term, the gaps not huge at the moment.

The SVR's are lower granted, but could well be higher at the end of a five year term.

The_J

squeeks wrote: »

The lender will try to recoup the entire outstanding portion of the mortgage debt, regardless of the current house value or the LTV of the loan, oh the joys of recourse loans. The personal loan provider will come after you separately.

First direct are offering personal loans for 6.1% (representative) for 7 - 10k. Some of the Natwest 10% deals using the OP figures were 6.09% during the fixed term, the gaps not huge at the moment.

The SVR's are lower granted, but could well be higher at the end of a five year term.

Sorry, what are you saying? I know they will come after the loan but it's not a LTV of 100% it's 90% so they will only come after 90k in your example. Not the unsecured element.

They can pursue the unsecured element but it doesn't have the same protection for the same lender.

The Natwest rate is 4.79% for NewBuy.