Unaffordable - but cheaper deal?

obay

I currently pay £805 a month for my mortgage, just did a DIP with Santander and they said I am not able to afford to pay £512/month?

How can this work out? I do have some debts, but nothing that isn't serviceable, ie, I have not missed a payment on anything over the last 5 and a half years.

glosoli

Essentially what is happening is they are looking at your net monthly income, and looking at a number of expenditures, including debt repayments, council tax, water rates, insurance costs, etc and incorporating expenditure from the ONS based on your household size, and assuming interest rates on the mortgage in excess of 7%, and determining what is "affordable" in line with the regulators guidance.

garyhemming

The above is correct. It’s also worth noting that although you’re currently paying more out per month, it isn’t to Santander.

Although you’re less likely to fall into issues with lower monthly payments, at the moment the liability isn’t theirs.

It will all be down down to their computerised affordability calculations though.

ACG

As above, lenders are not assessing your mortgage on what you are paying now or what you will be paying to them, but they have to stress test the mortgage at a rate of around 6-8% give or take. Every lender is different has different calculations, so you may find other lenders happy to lend to you. But these affordability rules were forced on the banks a year or 2 back.

obay

Ah, I see thank you!

It's just a bit strange, that's all I can afford it no problem, yet they decline me on affordability. our current provider stress test us to 16% (as it said on there offer letter...) So I just can't understand why this is like this... Best pay off some bills!

bowlhead99

obay wrote: »

It's just a bit strange, that's all I can afford it no problem, yet they decline me on affordability. our current provider stress test us to 16% (as it said on there offer letter...) So I just can't understand why this is like this... Best pay off some bills!

I very much doubt your current provider stress tested you to 16%. (over £16k of repayments per year on a £100k 25-yr mortgage).

6%, perhaps.

Lauralou79

Natwest advisor did stress test us 11 or 12% on our mortgage app this year! Which surprised me as I'd expected maybe 7/8 luckily we needed less than 50% mortgage so it wasn't an issue.

glosoli

The offer letter shouldn't have the stressed repayment on it, are you referring to the 20 year high figure? I.e if interest rates rose to the highest level in the past 20 years the repayments would be... ?