First Direct Mortgage affordability calculation

gadge

Tanken from reviewcenter.

"Mortgage affordability calculation"

"To assess whether or not an applicant is capable of repaying a First Direct Mortgage, they calculate your monthly payments on an assumed interest rate of approx 8% (regardless of the actual variable / fixed / introductory rate they offer)and then calculate whether on that basis + all your other fixed costs this exceeds 40% of your nett income. If so, they will not approve any kind of mortgage (repayment or interest only or offset) for you, regardless of LTV% This happened to me today for a mortgage application with LTV of (only )60% and a gold-plated credit rating. They do not tell you ANY of this while going through the initial application interview !!! The rates they offer are very competitive (now I know why, virtually nobody can qualify for them) and customer service is good but unless you can meet these stringent requirements, don't even bother applying, you're just wasting your time !! Like I did. Feel like I have been taken for a ride, won't touch them ever again with a bargepole."


What i would like to know is if this is true?

Also by fixed costs does this mean utility bills, council tax, house insurance...?

HappyMJ

Fixed costs are child support, loan and credit card repayments.

A variable cost would be your utility bills and if your estimated fuel bills for the new property seem low they (not necessarily FD) will use an average as well rather than use your figures.

If you set the mortgage term as long as you can such as 30 years (or the latest on when you could retire-not the date of when you want to) then the mortgage becomes affordable to more people. You can then choose to overpay the mortgage to reduce the term back to the orginal term that you wanted.

Gentoo365

A bank would never give away it's affordability calculation, and would not keep it the same forever.

I would ignore that, except to say that First Direct will assess according to a shocked interest rate and will ensure that the mortgage payments are affordable.

Even if that policy was true, then it does not mean that doing a bit of maths will give you a yes/no decision. As individual circumstances will change the result (in both directions).

Either way, you will know in a few days. I remember your question about maternity leave. You are sending in a letter regarding the situation. This means that your case will be looked at by someone who will have the authority to agree the loan.

They will not just get out a calculator. They will consider your situation and your income over the term of the loan.

It should be fine.

gadge

Maybe its just me reading into the negatives of first direct too much!

If the statement is true then my new mortgage and a loan i have does fall below the 40% (just about). I've applied for a 35 year mortgage with them at 90%. See what happens....

betmunch

Gentoo365 wrote: »

A bank would never give away it's affordability calculation, and would not keep it the same forever.

What a bizarre statement!

Most banks publish theirs on their website and allow you/your broker to check before application.

Thrugelmir

I would suggest that the poster of the review has little understanding of how lenders approach and calculate risk. As from the quote below seems to think highly of themselves. Which unfortunately has little relevance in terms of the actual mortgage application.

This happened to me today for a mortgage application with LTV of (only )60% and a gold-plated credit rating.

Gentoo365

Yep, the decision process is not 'weighted' it is 'linear'. The decision will be in this order:

1) Can the applicant afford the payments (can they pay) - Affordability Check
2) Can the applicant be trusted (will they pay) - Credit Check
3) Is the security acceptable - Valuation and LTV

2 and 3 can be 100% perfect, but it does not matter if 1 cannot be met.

Otherwise they would be a loan shark.

bigadaj

gadge wrote: »

Tanken from reviewcenter.

"Mortgage affordability calculation"

"To assess whether or not an applicant is capable of repaying a First Direct Mortgage, they calculate your monthly payments on an assumed interest rate of approx 8% (regardless of the actual variable / fixed / introductory rate they offer)and then calculate whether on that basis + all your other fixed costs this exceeds 40% of your nett income. If so, they will not approve any kind of mortgage (repayment or interest only or offset) for you, regardless of LTV% This happened to me today for a mortgage application with LTV of (only )60% and a gold-plated credit rating. They do not tell you ANY of this while going through the initial application interview !!! The rates they offer are very competitive (now I know why, virtually nobody can qualify for them) and customer service is good but unless you can meet these stringent requirements, don't even bother applying, you're just wasting your time !! Like I did. Feel like I have been taken for a ride, won't touch them ever again with a bargepole."


What i would like to know is if this is true?

Also by fixed costs does this mean utility bills, council tax, house insurance...?

That seriously impressive, if applied across the board we wouldn't be in the current mess,