Trouble finding mortgage, advice on options?

C22DTJ

Hi all,

My partner and I are first-time buyers looking for property in Stratford-upon-Avon. We both work in the area and would like to stay close due to reduced travel costs (and of course we like the area).

We've had an offer accepted on a new-build property of £165,000 and have started to look for a mortgage. Much of today was spent on the phone, and unfortunately it's not looking good.

We have a deposit of £25000, an extra £3000 or so to cover legal costs and stamp duty, and then enough money for basic fittings/furniture, but we're looking at borrowing £140k.

Our joint income is around £32k. We have no credit cards/storecards but I have a car on PCP on which I pay about £190 a month (about 18 months remaining), and my partner has a personal loan at around £225 a month (with about 3 years remaining).

The biggest problem we've had is finding a lender willing to lend 85% LTV on a new-build. It's a 2 bed house, and we've managed to get £15k knocked off the release price but obviously most lenders have a strict 80% LTV policy on all new-builds and won't budge. Understandable to a degree I suppose.

Those lenders that will accept an 85% LTV are not willing to go to £140k. The most we've been offered is around £100k.

Now, the thing that annoys me is that we've done a detailed affordability spreadsheet and assuming our joint take-home is around £2200, minus the £415 of loans/finance, leaves £1785. Assuming £140k over 35 years at around 4.5% is £650 or so a month, that leaves £1135. Minus bills, council tax, and groceries, let's say that leaves £500. I'd say that puts a £140k mortgage as quite affordable.

Now, I know it's never that simple, and the banks have to calculate risks, but I'm trying to find other options. At the risk of sounding arrogant (not intentional but I'm kinda disheartened at the moment), both my partner and I have a strong employment history, I'm just doing a Masters degree in my spare time (self-funded) and whilst I know that may end up doing nothing for me from a career perspective, I'd have thought it's another supporting factor that we're not just a fresh-faced couple likely to default on the first mortgage payment due. We also have strong credit histories (no late payments etc) and the applications we did manage to get through that ran credit checks said they came back fine.

I suppose what I'm wondering is whether we have any options from here? Are we likely to be able to negotiate at all by going and making face-to-face applications at the banks (all todays applications were done over the phone) or is it just going to result in the same decisions?

One 'last-ditch' attempt would be a joint mortgage with my Father. He's happy to do it, and my partner is happy for him too also, but I don't know if that would even improve the situation and I'm obviously aware of the possible implications.

Again, I apologise for sounding a little whiney but we thought we'd finally found a place we loved and now we're hitting some substantial stumbling blocks!

Thanks

Thrugelmir

C22DTJ wrote: »

Assuming £140k over 35 years at around 4.5% is £650 or so a month,

Big assumption. What's the effect on your budget if interest rates were 8%?

C22DTJ

Thrugelmir wrote: »

Big assumption. What's the effect on your budget if interest rates were 8%?

Fair point; it'd put the repayments at around £1000. However most offers we've had (albeit at a £100k lend) we're between 4 and 4.8% fixed for 2-4 years and I'm hoping (not certain, of course) that both my partner and I will be on substantially higher salaries by the end of the fixed term. In terms of the 'career ladder' we're both very much on the bottom rung, so to speak.

My partner works for local government HR on scaled pay so it's almost inevitable that if she's still working there (and already 5 years deep) that her salary will have increased at the very least.

Dave_Ham

Think this is why sometimes a broker will save you time.

This will be a tricky situation, although I would be able to find a solution I reckon..

That said, I can imagine there are lenders that will lend the multiples, but only at 80% and those at 85% have tighter income multiples and therefore will lend the %, but not the mortgage amount..

Speak to a broker and do not be bullied by the developer, everyone gets money off a new build against advertised price please do not rule out haggling some more with the developer....

All the best

C22DTJ

Thanks, Dave.

I'd considered trying to push the developer a little further. The release price was £179,995 but there's no way it was worth that. I thought it was perhaps worth £170k based on market value (before I realised lenders don't like new build's), but went in at £165k which they have accepted.

The plot is finished, and ready for occupancy, and also the last of it's type (well, only of it's type, it's a mid-terrace, slightly different from the others on the development) so I'm very tempted to just go in and say 'we can't secure lending at 85% LTV, would you drop it to £158k so we can hit the 80%'?

That seems like a massive drop, and really that does put the property almost below sold prices for the area.

I've considered a broker but to be honest, as a first-time buyer, I don't know a whole lot about this, I've done a quick Google, and you can imagine the kind of Ad-supported rubbish that returned.

Dave_Ham

Remember the developers/agents are world class blaggers. Have you looked at Zoopla/Rightmove to see the actual sold prices for the early releases as it may give you a flavour of opportunity.

Typically, they will also have an idea of mortgage lenders with an appetite, although please see the numerous posts and threads about how bad their mortgage advisors usually are so tred with caution..

Try and get yourself a recommendation for a mortgage broker, Google literally is a way to hit every sales database and get an inferior service for a superior cost...

There are opportunities out there given your circumstances at better rates and the loan to values needed..

Good luck

littlesparkles

I'm buying a new build and I did manage to get to 20% but this was with 15% of our own deposit and 5% from the builder. Nationwide were willing to accept this and this is who our mortgage offer is from. Other lenders that were mentioned by a broker we spoke to were Santander and Accord. All worth a try if you haven't tried them already.

Dave_Ham

You are unlikely to fit Nationwide or Accord, Santander are a struggle at the moment but would have more potential than the other 2....

C22DTJ

Thanks Dave, Littlesparkles.

Ok, I'll give the developer a call tomorrow and do my best. Failing that, I'll get onto a broker and hopefully make some progress.

Thanks again.

C22DTJ

Ok update on this, need a bit more advice.

The builder won't budge on the £165000. The only thing they're willing to do is offer a sale based on a 90/10 equity loan which would bring us in line with the lending criteria, however there is one condition; that my partners personal loan is cleared.

Now, my question is this - If a parent cleared that loan, and my partner paid that loan back to the parent, would that need to be declared on the mortgage application?

The concern for me is that officially, that doesn't change our situation, but it does according to our credit file. However, I really do not want to break any laws here and make a fraudulent application.

Effectively what that would do is free up enough lending in salary multiples to cover our required mortgage, and a few lenders have offered us the adequate amount providing that loan is cleared.

I assume it's a grey area? Any thoughts?

Dave_Ham

There is no right or wrong here, technically you are committing to repaying before completion and you will be. That said, you are supposed to declare on loans you have or will have so whilst fraud is a tough word you would be misleading the lender.

I am surprised a broker has not found you a better solution that the 90/10 equity loan?

I hope the terms are not silly on this and any lender is happy with this arrangement?

I would be interested which lender and product they have recommended??