Massive change in mortgage

squirrelcheeks

Hello, this is my first post. I think it might be a bit of a dead end but I just wondered if anyone had some advice. If not, then maybe sympathy or common sense would just do!

I sold my property late last year which I had bought with my ex. It was under sad circumstances (breaking up after a long time) and turned in to a nightmare with the buyers, but it was the start of a new chapter.

I then found a city centre flat to buy on my own in April. I had an offer of £182,500 accepted. I obtained a mortgage with a deposit of £46,000. So I was being loaned £136,500. This was all going along fine, however due to various problems with the developers going in to receivership I'm in the process of withdrawing from the purchase. It was my choice to do this but it was a legal nightmare (seriously, I simply have no choice effectively) and I decided to re-focus my search on a cheaper area where I could get more for my money. My mortgage is effectively still in place for the property at £182,500.

I then just recently found a property a shade under £187,000. It is a house (rather than a flat) and is a much more sensible purchase with a garage etc. It's taken me since May to find this place as there is very little available and everything is selling like hot cakes. In the meantime I've managed to save more money and I actually have £51,000 to put down. I also have additional savings of £7,000. I don't want to blow all of this (clearly I need to hold some back for legal fees too) but I figured I should be more than ok.

HOWEVER I checked with my mortgage advisor yesterday which I thought would be a formality. He told me that now the rules have changed I will only be loaned a maximum of £125,000! So even if I put down 58k (every penny I have) I cannot buy this property. I'm flabbergasted.

The main problem seems to be that the house attracts a service charge as it is on an estate which is maintained. The flat I was originally buying had ridiculously high service charges - £150/month. This house has a maintenance fee of £45/month. So despite the fact that the service charge is less than a third of the original charge, they are now willing to lend me £11.5k less.

The only advice my mortgage advisor has given me is to look for a house which has no service fees attached and I could be loaned more. Houses, by definition, are more expensive than flats anyway. I've already massively compromised on location - this house I found is quite far away from where I need to be (and I don't even own a car, so I will have additional costs in commuting).

I effectively have a deposit of at least £51,000. To me that seems like a huge amount of money. I can also free up a bit more and maybe go to £55,000 and still have enough left for fees for example. I do not have any debt. I don't have any major outgoings. The only thing is my student loan, which is taken out before my money goes in to my bank account. My mortgage advisor has all my bank statements and I had my application completed previously so we've been through this with a fine-toothed comb. I don't have a car, and I don't even drink. I earn 30k a year, which I know isn't huge but I think it's an ok wage and my job is secure.

If I am only loaned £125k, my repayments would be £450. I take home £1600 after deductions. Even with a service charge of £50 I've got £1100 left for everything (bills, food, living). I'm pretty sure I don't need all of that (yes I know, interest rates may go up etc).

I just feel so disheartened. Most of the properties I have been looking at, even though they've been houses, attract a maintenance charge. Because I'm looking at a rougher area I wanted to be in a relatively nice estate so these newer estates tend to be maintained. I don't want to feel like I might get robbed as I walk to my front door. There is no parking so I was originally thinking buying somewhere with a garage may allow for me to buy a car so I can commute to work and the shops (that's clearly a ridiculous idea now!).

Is this the state of affairs - a deposit of £55k, a relatively healthy wage, no debt and very little outgoings, no car, no drinking, clearing £1600/month, previous home owner (with at the time a sky high mortgage and ridiculously high repayments with a partner)... and I can only get loaned £125k. Yet banks etc are tripping up to offer me loans,

I guess I'm just really fed up of all of this. They have tightened these rules WAY too much and for some reason think I now cannot afford £45/month.

Anyone else agree? I really don't know what I can do, apart from move to an even cheaper area even further away and then have astronomical commuting costs (which of course, they won't take in to account, it's just all about the £45 apparently).

Mortgage_Mark_2

£125k is still over 4 times your salary, in fairness.

Post MMR you will notice a lot of changes in borrowing limits as more expenditure than ever before will be deducted from your income, before calculating how much you can borrow.

whitewing

Is your mortgage advisor linked to your bank, or is he a more general one?

PasturesNew

£1600/month takehome is a few quid under a salary of £25k.

£125k = 5x annual salary.

That is a LOT - and, for most, now, is an unachievably high multiple.

4x is more "the top norm" now.

Although your good deposit etc is great - and might allow lenders to squeak up more (hence your offer of 5x your salary) .... beyond that isn't going to be possible. In fact I'm surprised you were offered more in the first instance.

dunstonh

They have tightened these rules WAY too much and for some reason think I now cannot afford £45/month.

No they havent. You are still after over 4 times your salary which is higher than the pre credit boom norm of 3x. For many, it is a a return to normal. for those that never experienced a pre credit boom norm, it can come as a shock but it does make common sense.

Also remember that rates are at all time lows with increases expected. Double current levels would be closer to the norm. So, whilst you think it is £45 now, it wont be within a few years.

kingstreet

Pre-MMR some lenders ignored ground rent and service charges.

Now, all lenders have to include them.

Check different lender calculators to see if another lender would lend more. Some are more "generous" than others. You don't say who you applied to, but if you were rate chasing to the likes of HSBC, YBS or Post Office, you will get more from other lenders but the rates won't be as good.

squirrelcheeks

PasturesNew wrote: »

£1600/month takehome is a few quid under a salary of £25k.

£125k = 5x annual salary.

That is a LOT - and, for most, now, is an unachievably high multiple.

4x is more "the top norm" now.

Although your good deposit etc is great - and might allow lenders to squeak up more (hence your offer of 5x your salary) .... beyond that isn't going to be possible. In fact I'm surprised you were offered more in the first instance.

Ok, thanks. I need to look at my payslip then - I'm on 30k and I thought I had £1600 each month but I must be wrong on that (my wage is set in stone within a set grade structure which I have just double checked so I must have my pay wrong - I don't have my payslip with me at the moment). But still if they are only lending 4x salary I would only be loaned 120k so that seems to be right I guess.

Thanks for your replies. I suppose I am just really disappointed as I have a mortgage in place which is now completely out of sync with a new mortgage, and I didn't expect such a huge discrepancy especially with an increase in my deposit and a significant decrease in service charges.

As I said, I did have a mortgage before with an ex partner. This was some 6 years ago and we only sold that property late last year, but despite having a hefty deposit I feel as if I just haven't progressed! There is such a vast difference between the mortgage I was given in April and what I am being offered now. I guess I just didn't expect to be in this position - it just feels impossible to buy anything. My mortgage advisor is an all-of-market and has said I have a massive deposit compared to most - I guess it's just the disadvantage of not having two wages.

I can't possibly earn any more at the moment (in fact I've had a pay rise) so there's nothing I can do about my wage. It just seems like an impossible situation.

I realise £45 could go up. Even if it doubles within six months I honestly think I can still easily afford it.

Back to square one I suppose. I can't save loads more deposit much quicker as I'm now going to have to go in to rented accommodation. Which costs more than mortgage repayments would. In the meantime, prices are just going up so by the time I save the additional money I won't be able to afford to buy anyway.

The only way around it is if I find a house for the same price with no monthly fees. They'd lend me 140k then apparently. But as I said, that would mean massively compromising by living right in the rough of things (and buying somewhere that needs some work internally so therefore has more costs, and possibly costs loads more time and money in commuting).

squirrelcheeks

kingstreet wrote: »

Pre-MMR some lenders ignored ground rent and service charges.

Now, all lenders have to include them.

Check different lender calculators to see if another lender would lend more. Some are more "generous" than others. You don't say who you applied to, but if you were rate chasing to the likes of HSBC, YBS or Post Office, you will get more from other lenders but the rates won't be as good.

Thank you. My mortgage advisor is independent and the best lender for me is apparently the Halifax who will loan a maximum of 125k. Other lenders will not loan as much. He's done this based on the loan amount rather than on rates, so I think this is the maximum I can possibly get. He has been really helpful and I think he's basically tried his best, so I am thankful to him. I'm just so disappointed about going forward with any kind of purchase. I thought I was doing well, now I just feel like I am never going to afford anything despite having what I thought was decent circumstances.

ETA: I was aware of them being more careful about service charges. I guess I just didn't expect such a huge deduction for what seems to me like an average/affordable service charge.

kingstreet

I can think of a couple of lenders who will offer more, subject to the rest of the case. Your independent advisor should be aware of them too.

squirrelcheeks

kingstreet wrote: »

I can think of a couple of lenders who will offer more, subject to the rest of the case. Your independent advisor should be aware of them too.

Thank you. Would you be able to tell me who these might be? If not then I'll just ask my mortgage advisor to have another look. I was under the impression that Halifax were by far the best bet.

TrixA

Am I right in thinking you had an actual mortgage offer at £136k (as opposed to an offer in principle)? If so, have you explored whether you could simply transfer the offer to the new property? We're in this situation and our lender (HSBC) seemed confident we could do that without having to go through the new affordability testing rules.