FTB Advice/Help - bank won't lend what I'd hoped

rob_b_5

Hi,

I have managed to save up a 25k deposit plus a few k to cover related fees and a bit of money for moving in.

I was hoping to borrow 225k and buy a 250k house with that and my deposit (South London - 250k doesn't go very far). I went through a mortgage application with my bank (First Direct) today but they were only willing to lend me a max of 200k due to affordability.

My regular income is 51.8k per annum before tax, plus I receive a quarterly bonus adding up to another 7k per annum (in the last 5 years working for my company, I have always received this bonus in full).

As far as I understand, FD are one of the more strict lenders. In addition, they wouldn't take any percentage of my bonus into account whilst calculating affordability. They also took into account (quite reasonably I suppose) that I pay 6% of my salary into a pension, and that my student loan repayments won't be complete for another 15 months or so (I'm 29).

Does anyone have any advice? Should I speak to a mortgage broker and see if they can help? Try a lender with a reputation for being less strict, or that would take into account some percentage of my bonus? Should I just get real and accept I can't afford the properties I've been looking at?

All thoughts and advice really appreciated - I'm feeling a bit down right now and not really sure what to do. I had thought I was finally in a good position and I've just been given a big reality check I suppose

Rob

Dave_Ham

Certainly speak to a broker or go to a less stringent lender, as there will be options.

The numbers are achievable and affordable in some lenders criteria.

All the best

Paully232000

Maybe you cant afford a house worth 250K, but maybe there is someone out there that will lend, however I would go, as I did, to a broker who can look atthe whole of the market and knows which lenders use bonuses, which dont etc etc without you having to ring around every lender until you find one that will lend you the full amount.
Our broker was the best £299 we ever spent, just told us what we needed to provide, we emailed it all to them or gave it to her when we met a couple of times. Took all the problems out of the process, and got what we wanted and needed.

Thrugelmir

Lenders increasingly have to consider affordability in their decision making process. So it's not merely a question of now but the next 25 years as well.

Around 4 times basic salary isn't strict. Lenders on the whole run their entire mortgage books at around 3 to 3.25 times gross salaries of applicants. As above this level significantly increases the risk from a lenders perspective.

rob_b_5

Thanks all for your comments.

I guess I will speak to a mortgage broker and get their opinion.

Thrugelmir, that's interesting. Where do those figures come from?

Rob

kingstreet

Other lenders will lend more and a broker will be able to establish which ones and find you the best deal available from them.

Should I just get real and accept I can't afford the properties I've been looking at?

That's really down to you and your spending habits. Factor a mortgage rate increase into your plans and establish if you can afford to live, pay your bills and the mortgage at the size you have mentioned.

WantToBeAFarmer

As others have said here, mortgage broker is definitely a great way to go - you need one that can access the WHOLE of the market, and preferably gives advice as well as just information.

Apart from asking them to simply look for a lender that could give you more, there are a couple of other options to explore.

1. If you are confident that you can make the repayments on a £225k loan, and it's just the lack of the lender taking your bonus into account that seems to be the issue - have you considered getting a family member to join the mortgage application? Their income would be counted towards the amount the bank is prepared to lend and could help get you over the line. Obviously they would technically be liable for the mortgage if you were to stop paying it, but it seems that you are fairly confident about your current financial stability. One to mull over

2. Other options for you family or another type of helper to be able boost about the amount you could be lent - couple of decent articles here on the guarantor mortgages… (argh, was trying to link to a Which? article and one from HowToHomeBuy too but can't as I'm new. Google for it and all will be explained!)

Thrugelmir

rob_b wrote: »

Thrugelmir, that's interesting. Where do those figures come from?

Rob

The industry. Lenders run and appraise their mortgage (asset) books in their entirety. Not as individual mortgages. So depending on board policy, i.e. the target markets for new business. The parameters will be set and the products priced accordingly.

rob_b_5

Thanks to all again for their advice and comments.

In the end, I got a decision in principle from Nationwide for 225k, who are apparently prepared to lend me up to 255.5k (which I could possibly struggle to repay). Same APR as FD, 4.1%.

I feel confident I'll be able to make the repayments based on the amount I've been saving lately, and I wouldn't have a huge objection to taking a lodger in the worst case.

Bit of a roller coaster of a day.