Mortgage Decisions Logic

JB1234

I was recently lucky enough to receive a substantial inheritance from my grandmother which I used to make a lump sum payment against our Halifax mortgage, we're on a standard deal so no payments incurred for overpayment. I then contacted the bank to arrange to reduce the remaining term of the mortgage and keep my payments each month at roughly the same amount as currently. After going through the new very time consuming mortgage advise process I have been told no the term cannot be reduced as I cannot afford the repayments at the reduced term so they will leave me on my current remaining term payments. My repayments on current term are £2580 but the payments for the reduced term would be £2400. Not sure where the logic in this is - anyone have anything similar? This seems like utter nonsense - am currently waiting for a call back so I can ask them where is the logic in this decision. Any one have anything similar, I don't want to let them away with this.

mrginge

You originally got your mortgage under the old rules.
Requesting a reduced term requires an affordability assessment.
Under today's affordability rules you have not passed that assessment.
By inference, you would therefore also not have been eligible for your current mortgage if you applied for today.

The lender cannot get you off your current mortgage, but is under no obligation to offer you an alternative if you do not pass current qualifying criteria.

thecyclingqueen

I have just applied for a mortgage (moving home) and as I am a member of the Armed Forces I have a finite employment age of 55, Iam currently 46 which means they will only give me a mortgage based on my pension, not my current earnings or lower the years of repayment to 8 years 9 months which more than doubles the monthly payments. I am speechless as I am in a good secure job for the foreseeable future, very annoyed!!:mad:

kiddakidda

And therein lies the problem with the new affordability rules. A generic formula is applied and the outcome creates a nonsensical result.

The borrower has more than likely paid his mortgage over many years and never fell into any financial difficulty. Yet to reduce his outgoing by £180 per month puts him/her into non affordability!

I agree that these rules will benefit us all in the long run but common sense needs to be applied in these situations.

kingstreet

OP - what you can do voluntarily and what the lender can do to force you to pay over the shorter term are two different things.

Imagine if you got the shorter term, then your circumstances changed and you could no longer afford it. The lender could be criticised for putting you in a situation with higher contractual payments than necessary.

A longer term with voluntary overpayments you can alter at will is a much more flexible and sensible solution and will have exactly the same result. You will pay off the mortgage at exactly the same time, either way.

jojo_1982

Why does it matter? If you pay the lump sum off now, and can't reduce the term then the monthly payments will go down. Then if you just overpay every month to keep the payments at £2400 you'll pay it off early.

Mortgage_Mark_2

thecyclingqueen wrote: »

I have just applied for a mortgage (moving home) and as I am a member of the Armed Forces I have a finite employment age of 55, Iam currently 46 which means they will only give me a mortgage based on my pension, not my current earnings or lower the years of repayment to 8 years 9 months which more than doubles the monthly payments. I am speechless as I am in a good secure job for the foreseeable future, very annoyed!!:mad:

So you're bound to retire at 55....and you can either take the mortgage past that and prove retirement income, or take the mortgage to that age?

What's annoying about that?!

JB1234

Thanks for replies however what they have decided under the new affordability rules does not take into account
1) I will continue with contractually higher payments on current term - they do not change at all following my overpayment. Yes I know it means the overall should be paid of sooner but it doesn't get away from basic fact that they are refusing on basis that I cannot afford something which I am currently paying more than (and yes I have been through all the what if something changes drastically scenarios)
2) They based their decision on income from last year only which was drastically different from all the preceding years and this year. I'm self employed and took a lot of time out last year due to family illness, I still was able to pay what they say I cannot afford.

JustinR1979

It does sound annoying, but taking a longer term and making overpayments gets the same result - and is a lower risk to both you and the bank IF circumstances change.

amnblog

JB1234 wrote: »

Thanks for replies however what they have decided under the new affordability rules does not take into account
1) I will continue with contractually higher payments on current term - they do not change at all following my overpayment. Yes I know it means the overall should be paid of sooner but it doesn't get away from basic fact that they are refusing on basis that I cannot afford something which I am currently paying more than (and yes I have been through all the what if something changes drastically scenarios)
2) They based their decision on income from last year only which was drastically different from all the preceding years and this year. I'm self employed and took a lot of time out last year due to family illness, I still was able to pay what they say I cannot afford.

None of this is allowed for under the regulators rules.