Who do I trust (Mortgage borrowing amount)

ichidan

Hi folks,

So my wife and I are starting to look for a bigger place to live. She has her own property, and so this will be my first property (A first time buyer - or so I thought, until I discovered that if you're married and your wife owns a property, you're disqualified from the first time buyer scheme - wish I knew this before getting married, as we would've avoided getting married until after securing the mortgage - also can't get a divorce as it will take 5 years for my first time buyer status to be reinstated).

Anyway, I'm an IT contractor. A fellow IT contractor recommended I visit his mortgage advisor at Halifax.

Halifax Mortgage Advisor's calculation

When calculating how much I could borrow, to generate a Mortgage Promise (Agreement In Principle), she performed the following calculation:

DAY RATE * 5 (days in week) * 52 (weeks in year) * 5 (can borrow 5x annual salary).

She generated Mortgage Promise. All good, off to look for a property!

Now, when looking for a property, we discover an off plan new build home development, and reserve a property thinking that the Mortgage Promise is about 10% over the entire value of the property. So think this is pretty safe bet.

The property developers, recommend we go through their recommended mortgage brokers to find the best deal. To our surprise they come back with… Halifax. However, the brokers say that Halifax can only lend an amount which is 100k lower (or 83% of the original amount - 4.5*48/5/52) than the Mortgage Promise I had, and this was due to taking into account affordability / credit score etc. Suggesting that the credit score was the reason for the lower amount I could borrow. Also insisting to me that a Mortgage Promise is not the same as an Agreement In Principle. (Halifax's own website clearly states that they are the same: "A Mortgage Promise, also known as a 'Decision in Principle' or 'Agreement in Principle', is useful if you haven’t found a property you want to buy but would like to know how much you could borrow. " )

So I go back to the original recommended Halifax advisor, and she generates a new mortgage promise, based on my increased rate and reaffirms that everything is fine, I can borrow even more :rotfl:

Actual Mortgage Calculation

So after 'interrogating' the mortgage brokers. I eventually discover that the huge difference is because they calculate 48 weeks instead of 52 weeks, and that it's 4.5 times my annual salary, and not 5 times.

I also discover that there are simple online IT contractor mortgage calculators which give the EXACT value that the mortgage broker gave. Just by entering my day rate. So this has nothing to do with affordability, or me having a bad credit score or anything.

This all leaves me confused, frustrated, and having very little trust of any of these Mortgage advisors and brokers. They all seem either incompetent, or lying through their teeth. (This is also compounded by the recommended Halifax advisor suggesting there is little difference between a 10 and 15% deposit, while the Mortgage brokers told me there was a huge difference - I eventually had to data-mine Halifax's mortgage calculator to figure out the truth that I would be far better off with a 15% deposit than a 10%).

With an off-plan property. Putting down 5-10% reservation deposit of the value of the property now based on just a mortgage Agreement In Principle. Means that in 6 months time when the property has been built, going through a formal mortgage application I could find out that I can't borrow as much as they were suggesting. Ergo, I could lose that reservation deposit (essentially 25,000 to 50,000 pounds). All because these Mortgage advisors & brokers are too shady or incompetent to tell the truth.

So I'm going to cancel my reservation, and hopefully get some of my reservation deposit back, based on the incorrect? information the Halifax advisors have given me (as they suggested the property was well within my mortgage amount). Perhaps I could sue Halifax for the remaining amount LOL. I really can't trust the information their advisors are giving me to take a risk on an off-plan, so I'll stick with something that has already been built, so I don't risk much (perhaps just a valuation fee, if they screw up).

Anyway, I'm a computer programmer, not a lawyer. So I'm not too bothered about wasting my time on legal stuff trying to reclaim a few hundred quid.

What I would like to know is some clarification as to what exactly is going on?

- Was the Halifax advisor just making a mistake with the calculation? She didn't seem competent to even use a calculator. As she took my day rate, and tried multiplying it by the number of hours I worked per day (I had to tell you divide day rate by hours worked per day if you want hourly rate. Which was an irrelevant calculation anyway).

- Was she cheating the system? And if so, would it come back to haunt me when attempting to get the actual mortgage?

I could confront them, but if my mortgage advisor has been making this same mistake for years, maybe she could lose her job. I would rather her make a mistake that allows me to borrow a larger amount than the government / Halifax would officially sanction, as I know the repayments are easy based on my net income (not Year end Accountants reported net income lol, or my 'annual salary before taxes').

I know this is a long post, I just want to give you the whole picture, and why I'm posting this here, and not asking these Mortgage Advisors & Brokers that already seem far too incompetent or shady to give a straight answer. It's all smoke and mirrors with them, while this is my money at stake, and not their job at stake.

I'm upset, frustrated, and confused. I wish this mortgage process could be more transparent, with all the cogs of the machine exposed for us to understand how it works.

kingstreet

Halifax is day rate over 48 weeks, not 52.

4.5 x is the LBG income cap for Government schemes. If you aren't using HTB, you should still be able to get 5x less any outgoings.

Halifax usual maximum newbuild LTV is 80% unless your builder is on the newbuild panel, in which case you may be able to go to 90% or use HTB - Mortgage Guarantee, upto 95%.

A builder will expect you to apply for a mortgage immediately and have the legal work done so you can exchange contracts in 28 days with completion "on notice" when the build is finished. You won't be waiting for six months to apply unless the build is over a year ahead.

We are newbuild specialists, have arranged many mortgages for contractors with Halifax and have access to Halifax newbuild panel and newbuild "top-ten" products and higher loan to value, due to our association with Crest Nicholson.

RobMoney

I think all mortgage brokers have different systems and calculations, some being quite simple, others complex.

Consider it all ballpark figures and try not to get wound up about it. Someone mentioned on here recently that 2 weeks ago a few lenders reduced their 5x salary maximum to 4.5x which means take away half a years salary of buying power which is significant to everyone as it usually means a different standard of house.

It might go the other way in a few weeks time, so it's all a matter of waiting for the right time and the stars to align in my opinion. I did a mortgage calculation online this morning with NatWest as I haven't tried them before and they wouldn't lend me anything!

Anyway, I feel your pain.

Emmalips

Hi there. Can't really help much but posted a similar thread today regarding the figures given by the advisor for the AIP. I was quite succinct during my conversation about the source of income, twice, and was told I was well within the borrowing levels I required. So I went through the whole selling, buying process only to be told (without hesitation) by the actual mortgage arranger that the information provided to me was incorrect and I couldn't borrow anywhere near the amount quoted. Although I'm not sure he was entirely correct yet as he said he had to check it with the underwriters.

Moral of this story is that promises/AIP/DIP are not worth the paper they are written and I was advised by somebody else on here, it's always best to go through a broker first before making any decisions.

ichidan

Thanks kingstreet,

So how do I find out if they're on the new build panel? I presume they are. Would Barratt Homes be on the new build panel?

Perhaps the mortgage broker, forgot to switch off the HTB option on her form. A simple mistake to make.

Perhaps I should skip using their mortgage brokers, and just show the property developer the Mortgage Promise (AIP) I received from Halifax.

As this is just a Mortgage Promise. Whats the chance that when I apply for a mortgage I won't get as much, and how much could the amount vary by? What affects the variation, and how? Will having a wife reduce it, will have a child reduce it, will driving a 2000 pound car reduce it?

ichidan

My main concern is that this is off-plan, and they require a 25 to 50k reservation deposit, and for me to pay for the flooring that I would like.

If I cannot get the mortgage that the AIP suggests I can get, then I would lose a lot of money.

With an existing property. I would probably only lose a valuation, survey fee, or solicitors fee.

I just find it hard to work with a black box where I don't know what the answer will be until its too late. I think I need to look at property where the loan is perhaps 100k less than the worst case AIP.

Are there studies which show the difference between the AIP and actual amount that can be borrowed. e.g. 90% of actual mortgages are within 5% of the AIP etc.

What if I say my wife and I are in the process of separating, and that I'm not supporting my son. Will that get me a bigger mortgage?

Online mortgage calculators for IT contractors take Day rate * 5 * 48 weeks * 4.5. I've tested them, so does that mean they're assuming IT contractors are going for HTB mortgages? (I would post links to them, but I presume this site doesn't allow links to external sites).

kingstreet

Try entering your details in here;-

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

switching on/off the HTB Option so you can see the income cap in action.

Try two adults, one adult etc and you'll see the outcome. If you have a child, enter the child.

If you have credit commitments, childcare, student loan etc enter them in the credit commitments box.

If you enter all the details correctly, the calculator output and the DIP outputs should match. The only time they won't is if;-

you have recently repaid credit and the system hasn't yet caught up
or
the DIP system decides your credit score is too low, then you'll be offered a lower loan to value.

kingstreet

You pay a reservation fee at reservation.

You pay your deposit to your solicitor in advance of exchange of contracts. The builder will then fit your new home out to your spec. Without the legal protection of exchange of contracts the builder won't do that.

By that time, you will have a formal mortgage offer. You will pay nothing if your full application isn't accepted at submission.

Barrat/DWH/Ward is a top-ten member giving its broker access to the products. As far as I'm aware these are not available direct through Halifax branches.

Thrugelmir

ichidan wrote: »

This all leaves me confused, frustrated, and having very little trust of any of these Mortgage advisors and brokers.

What if I say my wife and I are in the process of separating, and that I'm not supporting my son. Will that get me a bigger mortgage?

Sounds as lenders may have an issue trusting you. Application fraud is not a recommended route to follow. As the outcome will have very serious consequences for you for many years.

Why not take the route the majority of people will take and sell their existing property. Thereby injecting the equity into the new purchase. Makes life far simpler.

ichidan

kingstreet wrote: »

You pay a reservation fee at reservation.

Done

kingstreet wrote: »

You pay your deposit to your solicitor in advance of exchange of contracts. The builder will then fit your new home out to your spec. Without the legal protection of exchange of contracts the builder won't do that.

Ok, so I've been told by brokers that Halifax needs me to put at least 12% down for deposit on the mortgage (as they determined I could only borrow EXACTLY 4.5x - which is probably just the broker making silly mistake). While Barratt homes say they need only 10% (or even 5%) deposit paid up front (I think the solicitor?), and don't need to pay the rest until completion. Their argument is that the property is off-plan, under construction, and if I back out once its built, they've built an empty house. So their deposit is for security.

kingstreet wrote: »

By that time, you will have a formal mortgage offer. You will pay nothing if your full application isn't accepted at submission.

Barratt Homes want exchange of contracts within 28 days. Does this mean I have a formal offer then, mortgage done-deal? Or is it in the 3-6 months later when property has been built and Completion occurs that I do a formal offer? - They obviously want their money before/at exchange, as they're scared of buyers backing out.

I know I probably sound like I'm asking dumb questions. But I'm just finding it hard to get 100% CONCRETE ANSWERS. I've never bought a house before, and especially one that is off-plan.

kingstreet wrote: »

Barrat/DWH/Ward is a top-ten member giving its broker access to the products. As far as I'm aware these are not available direct through Halifax branches.

I got a better offer going directly to halifax as they multiplied my annual salary by 5x, while the Barratt Home's broker just came up with a figure that was exactly 4.5x my annual salary - just saying it was due to bad credit score (which seems dubious as playing with the Halifax calculator you posted, nothing gives exactly 4.5x your annual salary apart from toggling HTB switch). Perhaps I should call up the brokers and ask if they need IT assistance?

Opinion

kingstreet wrote: »

Try entering your details in here;-

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

Just out of interest, in the "Please enter details of your client's expenditure", do you put everything in there ie. mobile phone bill, Sky TV, utility bills and so on?