How does affordability work?

paddy29

So just been refused a mortgage with Halifax. I asked for 42k, I have 35% deposit. I earn 16500 a year.

Credit check went through ok based on 35% deposit, I have a CTL property also with them and they were fine with that. It was affordability that was the problem.

Any ideas if there is any way I can improve this, i'll never be able to buy anything cheaper?

Mortgage_Mark_2

Impossible without more detail but they will take into account basic cost of living, current credit commitments, things like childcare etc, and then come up with the figure they'd lend after all of those are covered.

If you have £1,000 on a credit card, for example, Halifax will use 5% of that as a monthly payment, so £50 is effectively deducted from your income every month, taking your income down to £15,900 - and so on and so forth.

paddy29

Do you know how they get that info other than what I tell them? They asked me about all my outgoings and stuff. I have none, I have 3 empty credit cards I pay in full every month, no car loans, no dependants, nothing. Do all my banking through Halifax and have nearly 10k savings with them. I told 100% the truth.

That's what went in the computer and it comes out and says I cant afford a £130 per month mortgage.

caprikid1

Because it will not stay at £130 a month.

When I bought my first house it was £299 for 38K. I earned 12K and took lodgers in to live.

paddy29

I pay £500 per month rent just now and have been for 3 years.

kingstreet

Were your credit card balances higher in the last month to six weeks?

If you have assumed things have disappeared from the credit system, so you did not disclose them, you may be wrong. If you repay anything within eight weeks of applying for a mortgage, always state the last statement balance and note the debt is to be repaid on, or before completion.

Otherwise the system will think the credit you didn't disclose which it can see will continue.

Was the CTL keyed as a BTL? It should be, with the mortgage payment shown as a commitment and the rental income noted as additional income.

Are you buying a leasehold property? Did you take into account ground rent and service charges?

Use this and see what output you get;-

http://www.halifax-intermediaries.co.uk/tools_and_calculators/mortgage_affordability_calculator/default.aspx

if you are being offered less, there's something wrong.

Mortgage_Mark_2

paddy29 wrote: »

Do you know how they get that info other than what I tell them? They asked me about all my outgoings and stuff. I have none, I have 3 empty credit cards I pay in full every month, no car loans, no dependants, nothing. Do all my banking through Halifax and have nearly 10k savings with them. I told 100% the truth.

That's what went in the computer and it comes out and says I cant afford a £130 per month mortgage.

Credit search. Halifax penalise you if you don't declare something that shows up in a subsequent search (even if you declare the balance lower than it really is by mistake).

They also are obliged to stress test a mortgage for affordability at 3% higher than the initial rate, to allow for rate fluctuations over the next 5 yrs.

paddy29

No I cleared my cards a while ago and have been paying off in full each month since then. That's what I told her and thats what she keyed in the system

Using that form for a Freehold it says I should get 52,815. That's with 4800 annual rental income and £365 monthly mortgage commitment. This is all what was put in the system in the branch.

Very strange, maybe I will write a letter and ask for an explanation.

paddy29

Mortgage_Mark wrote: »

Credit search. Halifax penalise you if you don't declare something that shows up in a subsequent search (even if you declare the balance lower than it really is by mistake).

They also are obliged to stress test a mortgage for affordability at 3% higher than the initial rate, to allow for rate fluctuations over the next 5 yrs.

I never told any lies lies, I told them the truth. She said the credit check came out ok but needed a 35% deposit, there are 2 small defaults there for British Gas. They asked me at start if there was anything like ccjs, defaults etc and I told them yes there was defaults and I saw that she had ticked that part of the screen. She clearly said at the end this was about affordability and nothing else. Like I said, I can't possibly go lower than £130pm mortgage. Any property they lend on has to be valued at minimum 40k.

Mortgage_Mark_2

paddy29 wrote: »

I never told any lies lies, I told them the truth. She said the credit check came out ok but needed a 35% deposit, there are 2 small defaults there for British Gas. They asked me at start if there was anything like ccjs, defaults etc and I told them yes there was defaults and I saw that she had ticked that part of the screen. She clearly said at the end this was about affordability and nothing else. Like I said, I can't possibly go lower than £130pm mortgage. Any property they lend on has to be valued at minimum 40k.

I never said you did tell any lies - you asked how they would find out.

It seems like it could be down to stress testing then, sadly with an income of £16,500 it doesn't leave that much 'wiggle room' for their pay rate +3% affordability test. Add in one or two other expenses such as insurance or council tax and it gets very tight.

kingstreet

A 65% LTV only pass sounds more like credit score than affordability.