London & Country DIP Question

Jackop

Hi all,

I rang London & Country to check how much I could borrow for a mortgage yesterday. I wanted approx £150k with a £25k deposit. Guy said it should be comfortable and the letter came back with anything up to £180k.

Is that offer based on my potential deposit or is it only based on the affordability check he did? If I want to reduce my deposit, would that affect the amound I could borrow?

I wont be going less than 10% LTV but seeing as though the rates dont change between 10% and 15% there isnt much difference apart from adding a few quid to the monthly payments.

Am I missing something?

Jimbo1976

Typically if you reduce your deposit (and thus increase the loan to value) you may find the affordability is affected.

Lenders have to put aside more capital at higher loan to values so they tend to be stricter with who they lend to.

You may find that if you reduced your deposit then you would be able to borrow less. Lenders tend to use LTVs so at 90% then they will be tougher than at 89% even though the change in deposit is relatively modest

kingstreet

Presumably, this is L&C's finger in the wind approach, rather than actually complete an agreement in principle with a lender?

They seem to dislike doing such work because it doesn't instantly yield business.

In which case, you can easily use a lender's affordability calculator to see what's possible. Nationwide's, for example;-

http://www.nationwide-intermediary.co.uk/calculators/aff_calc

Jackop

Thanks Jimbo, so there is a difference between say a 12% deposit and a 14% even though the rates will be the same? Affordability shouldnt be an issue seeing as though it says I can get up to £180k.

I understand they havent actually gone to a provider and got an proper AIP. I was just wondering about the behind the scenes working.

Just FYI Combined salary of £39500, no debt, no dependants.

kingstreet

It varies from lender to lender, as you will observe if you use a few lender calculators.

Some have fixed lending limits and these take no account of loan to value. Others set their income multiple higher for lower loan to value cases.

It's trial and error, I'm afraid.

Jackop

Kingstreet, yes that is their approach. Im happy with that at the moment as I didnt want anything set in stone for now. The deposit is coming from shares which im selling at the end of next month and start of april (tax reasons). So going to a lender before I have secured the deposit would be fruitless anyway.

I did the nationwide one at it came up with basically the same figures (£184k). I actually did about 20 different ones from different lenders and it ranged from £110k to £220k! So I ended up taking them with a pinch of salt.

Jackop

kingstreet, looks like we said the same thing there. Your input in very much appreciated, I have taken note.

Thanks

kingstreet

As mentioned, different lenders use different income and affordability models.

Halifax, NatWest, Abbey/Santander/ Barclays/Wooolwich are at the more generous end around 5x income, while others top-out at 4x, sometimes less.

Caution is admirable and sensible, but the "pinch of salt" is not a good idea. There are lenders who genuinely lend more than others, a lot more.