Are we likely to get this mortgage....?

schrodinga

Going for a mortgage this week, in order to buy a new build home. Our mortgage adviser is confident that we should get it okay, but
I'm worried.

Key worries are:

1) this will be our third mortgage. Both my husband and I have out own flats, we plan to buy a house together and rent out the flats. Our household income shoud comfortably cover all three mortgages and bills, but ideally we don't want to have the two flats empty for any length of time.

2) husband has switched from permanent employment to contracting work. He earns very good money contracting, but obviously there is uncertainty around contracts. We're sensible and pay a salary from his company and hold back much of his earning to tide over incase there are periods without work.

The mortgage we are going for is a fixed rate. We are putting approx 60% deposit down on the house, so are expecting a competitive rate to reflect the small LTV.

Am I worrying about nothing? I know mortgage companies are tightening who they lend to, so I'm just worried they'll see our position as overtly risky.... Would appreciate thoughts!

bowlhead99

If you've shared all this information and concerns with your adviser, and they are an independent adviser who actually knows the market and where to place you, rather than just an in-branch adviser at a building society who's really just a sales rep: then you are probably OK if they say you are. They have more facts and figures about the property and your financial situation than we do.

If you only need a 40% mortgage you might be able to support it on just your income without your husband's company having much of a track record. Or perhaps the history of 'very good money' demonstrates that he is hugely in demand and would easily get a replacement income, and the 60% equity is a comfort to the lender if it all went wrong. You are not necessarily going to be viewed the same as a FTB seeking 95% LTV when they've only just gone self-employed in a new venture.

You don't say where you are living at the moment or whether the flats are already rented out? Are you first-time landlords? You may struggle to be accepted on three residential mortgages at once, because two of you can't be resident in three properties. The two flats being let out would be expected to be on buy-to-let mortgages which will require you to have a decent amount of equity in them, a decent amount of income coming out of them (usually a % in excess of the mortgages), and probably for you to not be at the limit of affordability on your house mortgage - so you can cover the flat mortgages in void periods or cover essential repairs or renovations which would be a threat to their income yield.

If you're not living in the flats, the loans secured against them are supporting a commercial business and so the residential rates and terms you see in the headlines from different lenders may not apply. I presume that as you say you have a good income and lots of deposit to throw into the new house, the flats are probably not on 80%+ LTVs and this might not be any issue for you.

You have an adviser who presumably has been through all your details and obviously you wouldn't be seeking advice from anonymous strangers on an internet forum as an alternative to simply asking the paid adviser about your concerns. So as they know what we know, and more, and they are confident, there's nothing much for us to say apart from wishing you well and telling you not to fret away your weekend being stressed.

Clearly there are some risks in your situation but the professionals on here won't be able to give you a guaranteed yes or no on the information you've given, and the non-professionals like me are only guessing. So why not just wait and see what the lender says?

holly_hobby

Despite what the EA or onsite mge adviser says, this won't be a staight forward application due to your husbands very recent entry into contracting Iwhich I presume is within the same employment sector he prev worked as an employee). This is because typically a lender will want to see evidence of historical contracts over a sustained timeframe, with usually at least 12 mths audited books (as I am assuming he operates under a Ltd Co for client indemnity purposes).

40% ltv although well below MIG levels, is still a risk with what may be considered uncertain income, of course this would be mitigated if you are of course the main earner or have an healthy income that may sevice the mge.

Moving to your flats, if let under ASTs and you have consent to let from your lenders, they will normally be set aside for affodability purposes for a resi mge application, but there are a few lenders who will include them within their affordabilty assessment. However, whether the resi lender will be happy with the exposure you have in total may cause issues.

My best advice, would be to source your mge through a decent whole of market broker, whom has free reign of lenders and contacts (as oppossed to an onsite or EA adviser, whom typically work from a set panel, or a preferred panel).

If you are having issues re the contract element, there are also specalist contractor contacts that you may google.

Hope this helps

Holly

schrodinga

Hey! Thanks for the replies so far.

Just a bit more info/background. My husbands salary is £100k plus, he's an IT contractor currently half way through a years contract with a good possibility of an additional six months extension. He has worked in the IT industry 10+ years, albeit contracting now for only six months. I'm full time employed on an average salary of £60k.

Regarding my husband's flat he has between 40-50% LTV. I'm not so lucky, my flat is probably closer to 80% LTV. We may look to sell mine.

In addition to the above, we are moving my Mum into the new house we are looking to purchase. Her pensions will add to the 'household' income by appprox £20k per annum.

I'm aware this is not a straightforward mortgage application. We've done the sums and are comfortable we can afford the mortgage, building in various scenarios (I.e. flats not letted/husband out of work). Just not sure if mortgage company will view circumstances as different!

Thanks in advance!

Thrugelmir

What terms have been agreed with your current lenders with regards to the flats? As remaining on residential mortgages with regards to interest rates longer term is unlikely.

schrodinga

Hi Thrugelmir. We haven't switched the mortgages on the two flats as yet. Both are outside the tied mortgage period and have defaulted to the standard variable rate. Haven't approached the respective companies to enquiry after BTL as yet.

I do suspect there may be a problem getting BTL on my flat, as when purchased the deeds were written to encourage direct ownership. Although I know my neighbours are letting out currently on the same deed arrangements.

schrodinga

I should say that the two mortgages we are being pointed toward is a 2 and 5 year fixed rate from Nationwide and Virgin money respectively. No experience of these companies to date, so not sure how hard line they are....

holly_hobby

schrodinga wrote: »

Just a bit more info/background. My husbands salary is £100k plus, he's an IT contractor currently half way through a years contract with a good possibility of an additional six months extension. He has worked in the IT industry 10+ years, albeit contracting now for only six months. I'm full time employed on an average salary of £60k.

So he has 6 mths contracting history, but 10 yrs in the sector - which means no SE books or HMRC return to date.

Lenders in the case of FS/IT contractors typically look for evidence of contractual history in excess of 12 mths and ongoing placements of at least a least a 6 mth term. The typical view of looking at IT/FS contractors, is to use the value of the contract in the affordability matrix, with as I say typically a min of 12 mths contracting or employment in the sector, with prev experience and a likely extension - Halifax have this stance.

schrodinga wrote: »

In addition to the above, we are moving my Mum into the new house we are looking to purchase. Her pensions will add to the 'household' income by appprox £20k per annum.

Keep Mum out of the mge mix if you want the max repayment term possible, as otherwise the max term will be capped to circa her 75th birthday - so if she's not needed don't include her.

(if kept off the mge) Mum will have to sign a consent to vacate disclaimer too, which is totally standard practice where there are residents over the age of 17 whom will reside in the property post completion, but will not be party to the mge.

If mum is funding anything of the 60% deposit (and you want to keep her off the mge, re the restricted term) the lender will have possessionary issues re her capital contribution and residency.

schrodinga wrote: »

I'm aware this is not a straightforward mortgage application. We've done the sums and are comfortable we can afford the mortgage, building in various scenarios (I.e. flats not letted/husband out of work). Just not sure if mortgage company will view circumstances as different!

Thanks in advance!

The lender will assess against the their criteria, and whilst you may feel able to support, their evaluation will bring many things into the mix.

As I say, if this goes belly up (and notwithstanding any capital injection issues and Mum), Halifax may be worth considering re their stance on IT contractors, but ideally if the current application fails, I would like to see you spend a fee and consult with a whole of market broker on this one.

Hope this helps

Holly

holly_hobby

schrodinga wrote: »

I should say that the two mortgages we are being pointed toward is a 2 and 5 year fixed rate from Nationwide and Virgin money respectively. No experience of these companies to date, so not sure how hard line they are....

I'm pretty sure Nwide want 12 mths history if he sources his contracts via an agency.

If he sources his contracts directly with the Client, then AFAIK they will treat him as self employed ... however given the low'ish LTV, this may be a mandate decision of the UW if it falls os of their std criteria.

AFAIK Virgin, have a similar stance to Halifax re contractors.

Holly