turned down based on "affordability"

TheLifeIReallyWant

Imma_Number wrote: »

With regards to taking out an endowment

Ah Ok so endowments are not recommended/don't exist. I save in as ISA already so I'll need an additional plan (of some sort) to deal with the mortgage - presumably having it just sitting in a savings account is not going to be efficient?

Thrugelmir

TheLifeIReallyWant wrote: »

Ah Ok so endowments are not recommended/don't exist. I save in as ISA already so I'll need an additional plan (of some sort) to deal with the mortgage - presumably having it just sitting in a savings account is not going to be efficient?

Repayment is norm these days. For the simple reason that it's the only option many people have. Keep overpaying the mortgage if you are certain that the property will become yours. Once matters are finalised.

TheLifeIReallyWant

Thrugelmir wrote: »

Repayment is norm these days. For the simple reason that it's the only option many people have. Keep overpaying the mortgage if you are certain that the property will become yours. Once matters are finalised.

Ok but for me it does not seem to be an option - for whatever reason the bank have decided I cannot afford the mortgage myself so I need to put in place an alternative solution. The divorce is not going to suddenly mean I have more money.

I am going to start looking with alternative providers - can anyone advise whether Natwest is particularly stringent? I will also consider alternative investments to pay off the mortgage.

ViolaLass

Whether you can get the new deal or not, overpay what you can for now.

You suggest you're on a two-year deal now. After that, just get a deal that allows you to overpay by the amount that you want to without ERCs.

All the rest is bonus, surely?

TheLifeIReallyWant

ViolaLass wrote: »

Whether you can get the new deal or not, overpay what you can for now.

You suggest you're on a two-year deal now. After that, just get a deal that allows you to overpay by the amount that you want to without ERCs.

All the rest is bonus, surely?

I'm not on a fixed deal now (I was trying to get on one) so I can over pay what I want now. However with the higher interest it's just going to take me much longer so - I was trying to explore ways of being more efficient.

Interest is currently about 1200 - I want to repay about 3000 (interest +capital) I haven't done the maths but if I can reduce the interest to 500 then I have 700 extra a month to attack the capital with. But on a discount rate I can only overpay 10% so need another way of saving.

I'm not finance savvy at all so I just want to figure out the best way to do things so I don't get 10 years down the line and want to cry at all the wasted interest.

WellKnownSid

Overpaying will help you even more given the higher interest rate...

Thrugelmir

TheLifeIReallyWant wrote: »

Ok but for me it does not seem to be an option - for whatever reason the bank have decided I cannot afford the mortgage myself so I need to put in place an alternative solution. The divorce is not going to suddenly mean I have more money.

I am going to start looking with alternative providers - can anyone advise whether Natwest is particularly stringent? I will also consider alternative investments to pay off the mortgage.

From April 2014 lenders were required to operate under the Mortgage Market Review. In short this involves them properly assessing affordability of the mortgage under a number of criteria. The days of an interest only mortgage being advanced on a wing and a prayer repayment plan are now over. As it exposed the lenders themselves to the wrath of the regulator (FCA). Regulatory guidance is that mortgages are assessed for affordability at interest rates of 7%. Current abnormally low interest rates will end one day.

TheLifeIReallyWant

Thrugelmir wrote: »

From April 2014 lenders were required to operate under the Mortgage Market Review. In short this involves them properly assessing affordability of the mortgage under a number of criteria. The days of an interest only mortgage being advanced on a wing and a prayer repayment plan are now over. As it exposed the lenders themselves to the wrath of the regulator (FCA). Regulatory guidance is that mortgages are assessed for affordability at interest rates of 7%. Current abnormally low interest rates will end one day.

OK thanks - that's interesting. Do all banks check affordability at 7%?

I'm currently paying at 4.5% (although obviously interest only) and believe 7% (capital repayment) would be affordable but since the bank don't I need to try an look at alternatives.

Ideally I want to pay the mortgage off in 12 years which I believe I can afford.

I understand the banks are more regulated, that they can choose whether to lend to me or not and that I should have resolved this sooner but I dint and now I just want to figure out the best way to sort this mess out.

ViolaLass

TheLifeIReallyWant wrote: »

I'm not on a fixed deal now (I was trying to get on one) so I can over pay what I want now. However with the higher interest it's just going to take me much longer so - I was trying to explore ways of being more efficient.

Interest is currently about 1200 - I want to repay about 3000 (interest +capital) I haven't done the maths but if I can reduce the interest to 500 then I have 700 extra a month to attack the capital with. But on a discount rate I can only overpay 10% so need another way of saving.

I'm not finance savvy at all so I just want to figure out the best way to do things so I don't get 10 years down the line and want to cry at all the wasted interest.

You may not be able to do anything about the interest rate (I can't advise there) but if the amount you can afford to overpay would cause you to be charged fees, save the extra in a savings account and put in on the mortgage at the end of the deal before the next deal starts. That at least gets the amount owed down.

Thrugelmir

TheLifeIReallyWant wrote: »

OK thanks - that's interesting. Do all banks check affordability at 7%?

As said in my post. Regulatory guidance is 7%. Is only guidance. However mainstream mortgage lenders have no need to chase business by moving too far away from this level. Nor should it be looked at in isolation as it's only one factor in assessing affordability and screening out those borrowers that pose too higher a risk.

Any lender offering mortgages to those with a higher risk profile will load the interest rate on the product. Mortgage books are written on pooled risk not individual borrowers mortgages. Hence why there's a disconnect between what borrowers think is the case and what lenders actually do,