Don't understand why I can't get a mortgage :(

j0nnyguitar

Hi all. I wonder if you can help. Last summer, 2014 I put down a small reservation fee on an off-plan property for around 430k.

At the time I was given a decision in principle. Then the completion date was delayed a couple of times.

I've recently got a call saying the property is close to completion and I need to apply to a mortgage ASAP. I've been told now by two brokers that no one will lend to me because:

a: I am self-employed (IT Contractor) but only have 1 years accounts. I've been trading 18 months. (the halifax are ok with this, but not the below)

and also

b: I need to use the Help to Buy scheme for a 20% equity loan, and it seems any lender happy to lend to someone who has been self-employed less than 2 years want to cap the scheme at properties worth 250k or less. (the halifax in particular are saying this)

I'm tearing my hair out trying to find a lender happy with both a and b above, but it doesn't seem possible any more!

I am totally gutted. The developers say they will put out this week if I cannot prove I can get a mortgage.

If anyone can offer any advice I'd appreciate it. I have a good credit rating, a 5% deposit saved and never been out of work. Surely someone will lend to me?! What a difference a year makes!

Thanks all

Jonny

md87

I am no expert but it is clear the lenders see you as high risk...presumably as you only have a 5% deposit and you are self-employed with only accounts for 1 year. And the property price is rather high so it may be that the only way forward is to go for something much cheaper initially.

j0nnyguitar

I honestly don't think the lenders see me as high risk. There's nothing about my situation that would give that impression. In fact, last year there were several lenders willing to give me a mortgage.

The only thing that's changed is the Halifax's attitude to help to buy, capping it at 250k.

kingstreet

Yep.

We've had plenty of clients stuck like this.

They need to use Halifax for the daily rate and long offer period, but can't use HTB- Equity loan because of the cap.

There's no other lender offering HTB - EL which will do this.

The only thing I can suggest is you use a specialist broker and use the HTB - Mortgage Guarantee scheme for a 95% mortgage.

It will end up more expensive, but you won't be giving away the growth on 20% of the value of your home.

j0nnyguitar

Thanks Kingstreet. Might you be able to suggest any brokers that could help? How does the "Mortgage Guarantee scheme" differ to the "equity loan"?

kingstreet

There's no equity loan.

From your point of view, you get a 95% mortgage. The rates are 4.99% with £999 fee, or 5.39% with no fee.

Compare that to 3.44% and 3.74% for the HTB - Equity Loan scheme, there's quite a difference.

These are available to a specific Halifax builder panel via the newbuild panel brokers they work through.

Hopefully your builder will be on the panel and they can provide details of their usual broker.

amnblog

It's a very slim market J0nny and £408K at 4.99% is quite a bit more than £322K at 3.5% or less.


Think on - the smarter man may wait until he has 2 years trading figures.

kingstreet

I agree.

If two years SA302s give you the income you need, you can get a two year fix at 1.85% on the HTB - EL scheme and on that amount that is going to make a massive difference.

amnblog

About £1200 a month less interest.

Thrugelmir

j0nnyguitar wrote: »

I honestly don't think the lenders see me as high risk. There's nothing about my situation that would give that impression.

Lenders may well have no appetite to lend at the level you are after. So while you may not be high risk. Lending at this level certainly is. They would much to prefer to lend to separate borrowers rather than you alone. That's the commercial reality.