First Direct refuse to extend mortgage term on affordability!

minxybaby

We have a mortgage with first direct that is in 2 parts, our original amount that's been in place for 5+ years on a variable rate, and an amount we got for an extension 3 years ago, on a fixed rate.
We approached first direct to extend the term as there's 14 years left, and we are both in early 40s, so plenty of time and we could do with lowering mortgage payments.
They have refused, citing affordability! Seems perverse...
Asked them how can it be less affordable for us to pay a lower monthly payment? they said 'not my decision, it's the underwriters!'
We both work, and have young children.
Am I missing something as this seems wrong.
Would they prefer we struggle and ultimately could be repossessed, or that we lengthen the term and retain our home and keep paying them?
Any advice appreciated as we want to challenge this and thought that lenders now were obliged to support borrowers to maintain their homes in a reasonable manner.

jadex

new rules... unfortunately.
on a positive note: you have a mortgage which you might not get at all under new rules

kingstreet

minxybaby wrote: »

We have a mortgage with first direct that is in 2 parts, our original amount that's been in place for 5+ years on a variable rate, and an amount we got for an extension 3 years ago, on a fixed rate.
We approached first direct to extend the term as there's 14 years left, and we are both in early 40s, so plenty of time and we could do with lowering mortgage payments.
They have refused, citing affordability! Seems perverse...
Asked them how can it be less affordable for us to pay a lower monthly payment? they said 'not my decision, it's the underwriters!'
We both work, and have young children.
Am I missing something as this seems wrong.
Would they prefer we struggle and ultimately could be repossessed, or that we lengthen the term and retain our home and keep paying them?
Any advice appreciated as we want to challenge this and thought that lenders now were obliged to support borrowers to maintain their homes in a reasonable manner.

Call back and say you are in financial hardship, then the support you require should be forthcoming. A lender may offer a period of paying interest only, or an extended term.

A lender cannot now, post-MMR, change a mortgage if the change will take them to a point which fails affordability. They cannot "advise" you to make your mortgage unaffordable, regardless of the current position where it would be deemed unaffordable if you applied for it today.

Thrugelmir

minxybaby wrote: »

Would they prefer we struggle and ultimately could be repossessed, or that we lengthen the term and retain our home and keep paying them?

Alternatively sell the property and rebalance your finances at a more affordable level. Onus isn't on the lender to solve your problems. With interest rates at record lows simplying extending the term may not be the solution. As interest rates normalising you may well find yourselves back in a similar situation as now. Hence lenders reluctance to agree to a change of terms. Lenders have a regulatory responsible in this regard as well so have to protect themselves against any comeback.

HappyMJ

minxybaby wrote: »

We have a mortgage with first direct that is in 2 parts, our original amount that's been in place for 5+ years on a variable rate, and an amount we got for an extension 3 years ago, on a fixed rate.
We approached first direct to extend the term as there's 14 years left, and we are both in early 40s, so plenty of time and we could do with lowering mortgage payments.
They have refused, citing affordability! Seems perverse...
Asked them how can it be less affordable for us to pay a lower monthly payment? they said 'not my decision, it's the underwriters!'
We both work, and have young children.
Am I missing something as this seems wrong.
Would they prefer we struggle and ultimately could be repossessed, or that we lengthen the term and retain our home and keep paying them?
Any advice appreciated as we want to challenge this and thought that lenders now were obliged to support borrowers to maintain their homes in a reasonable manner.

How much more time do you want to add on to the mortgage?

How much is your overspend each month? If it's small such as £100 a month or so you could fund the shortfall by using credit then in 14 years you can start paying down the credit instead of building it up each year. If you started with a 0% on purchases credit card over as long a period as you can get and put all of your purchases on it saving the cash you would have otherwise have spent and just before the 0% on purchases introductory rate expire you switch the balance to a 0% on balance transfer card then get another 0% on purchases card. After 14 years you'll have around £15,000 of debt owing on credit cards which you can then turn into a low interest rate personal loan over 5 years the payments you should aim to equal your monthly mortgage payment which you'll no longer have. That would currently be £272 a month if you could get a personal loan.

That's a very complex way of adding 5 years on to the mortgage without having to sell. It's not for the faint hearted.

Selling or remortgaging with another provider at any point in the next 19 years and you can use the funds raised to clear all of your debt and you'll still have enough for a deposit on a new property.

minxybaby

Thanks all.
I understand but it's still perverse.
Basically looking to extend term by 6 years, done a mortgage calculator online and we should easily afford it and meet criteria. Have a sneaking feeling it was a very bad attitude advisor, but getting through to them again or getting them to call back is nigh on impossible.
Push comes to shove I think we can remortgage to someone else, there's a small exemption penalty but would be good to get away from first direct whose customer service is atrocious! We asked them for a payment holiday a few months back, which the mortgage allows, but they said it would impact our credit rating and be a black mark against us!

Thrugelmir

minxybaby wrote: »

We asked them for a payment holiday a few months back, which the mortgage allows, but they said it would impact our credit rating and be a black mark against us!

Sounds as if there's more to your financial situation than you've disclosed.

Basically looking to extend term by 6 years, done a mortgage calculator online and we should easily afford it and meet criteria.

Affordability is assessed at 7% interest rates. This is the criteria that lenders will use.

tomtontom

minxybaby wrote: »

Thanks all.
I understand but it's still perverse.
Basically looking to extend term by 6 years, done a mortgage calculator online and we should easily afford it and meet criteria. Have a sneaking feeling it was a very bad attitude advisor, but getting through to them again or getting them to call back is nigh on impossible.
Push comes to shove I think we can remortgage to someone else, there's a small exemption penalty but would be good to get away from first direct whose customer service is atrocious! We asked them for a payment holiday a few months back, which the mortgage allows, but they said it would impact our credit rating and be a black mark against us!

First Direct does not have atrocious customer service, they are generally viewed as one of the best in that respect. Would you be suggesting the advisor had a very bad attitude if they'd granted the extended period? I'm guessing not.

If you are struggling to pay your mortgage then post a statement of affairs on the Debtfree Wannabe board, they'll be able to help you budget better.

warmsnow

First direct may pick up the phone quickly but when it comes to mortgages they are absolute stickler for a long list of rules, some of which are forced on them by the regulator, that I am assuming has been causing you problems.

Effectively lots of features that let people afford homes they MAY not be able to afford means that those features are banned for nearly everyone. Even if letting you have one of these features now might actually help you and them.

I would recommend getting a remortgage quote elsewhere. Others are usually a little more easy going than first direct and it sounds like the mortgage calculator gave you encouragement. Just be advised all the big lenders are tougher now - though I'd still hope you can get a great deal on a remortgage with a 20yr term. Be very clear about the term though, they tend to assume the same term as the one you're replacing otherwise.

Thrugelmir

warmsnow wrote: »

Effectively lots of features that let people afford homes they MAY not be able to afford means that those features are banned for nearly everyone. Even if letting you have one of these features now might actually help you and them.

Which features?

chappers

Thrugelmir wrote: »

Which features?

Probably something along these lines, maybe not strictly features but I got what they were getting at.;

In 2003, my business partner and I took out a self cert mortgage on a BTL property, we only had a 10% deposit and the rent was only 75% of the mortgage payment. They didn't want to see either our own tax statements or those of the business we were running, just a statement from our accountant stating that the business was solvent and a going concern. No affordability checks nothing.