Impartial advice please - is this mortgage offer any good?

Amber07

Is this mortgage offer any good for someone with a poor credit rating?

We went to a mortgage advisor (recommended by a family member) and we were looking for a mortgage of £75,000, the property we are buying is £120,500.

We specifically asked for a 3 year fixed rate, interest only, because we might move again after the 3 years, we haven’t quite decided yet.

My partner has a £9,000 debt in his name, so I know that drastically reduces the chances of us getting one of the better mortgage rates, but I was hoping our advisor would do his best for us.

We have been offered a rate of 6.28% for 24 months (monthly payment of £401.63) – but I really didn’t want to have to remortgage in only 2 years time, especially when I saw what the fees were….

There are fees for £1,649.50 + £94.50 for insurance premiums. I was quite surprised how high the fees were, last time we remortgaged in 2005, we paid fees of £545, yet our credit score was about the same.

The problem we have, is that we have only just received all these confirmed details in today’s post, although the process was begun 6 weeks ago. We are due to move in only 3 weeks time, and I’m now worried that we are going to have to accept this mortgage, despite my doubts.

I know very little about current mortgage situations, I’m just looking for some impartial advice from people who know more about this than I do.

homer_j_3

First of all, do not be rushed into making the biggest financial decision you make just because you are going to move in 3 weeks.

If you have got your solicitor doing all the legal work, it shouldn't take too long to get another product selected. There are a few things that you haven't made clear in your post.

You have said that you have a poor credit rating. What makes it poor?

What are the fees made up of?

What lender have you been advised to use and is it just an illustration that you have received or is it a formal mortgage offer?

You mention nearly a £100 in insurance premiums - what are they covering?

What your earnings are and debt repayments are?

Is there a reason why you would not want to clear the debt before your next mortgage?

Please understand that arrangement fees for mortgages have shot up over the last 12-18 months and we are seeing some expensive ones that make yours look like a drop in the ocean.

It has nothing to do with credit score as such but you will find that adverse lenders can charge slightly higher fees as well as rates too.

If you can give me answers to the above questions, it will enable me or one of the other advisers the chance to try and make sense of it for you.

dwsjarcmcd

Also is your broker adding anything to the fee? £1649.50 seems a funny number for a lender to charge (even on a % basis)

herbiesjp

Indeed, as homer rightly says, having the £9k debt does not necessarily mean a more expensive deal

You have not mentioned any adverse credit history - do you have any at all, if so what was it?

Have you had a survey done yet?

Just to confirm that arrangement fees have increased a great deal, so that could well be the case for the deal you selected

Is the £9k debt just one loan, or is it loans and credit cards? Can you give a breakdown?

What are your two incomes? Are you both employed with payslips to verify the income?

Are you paying a fee directly to the broker also?

Amber07

Thanks for taking the time to reply, it's appreciated. - I will try and answer all the questions...

homer_j wrote: »

You have said that you have a poor credit rating. What makes it poor?

My partner had a loan which he defaulted on a few years back for £9000, although we have arrangement in place to pay back, he can never get credit. On top of that we have credit cards which add up to £3,000 and store cards/catalogues which are around £1,000 in total, but the big one is the only defaulted one. My credit history is fine, it's just my partner who has trouble.

What are the fees made up of?

Completion fee - £1495.00. Telegraphic transfer fee - £50.00 Title Indemnity admin fee - £104.50. Total= £1649.50

What lender have you been advised to use and is it just an illustration that you have received or is it a formal mortgage offer?

Beacon homeloans (Redstone mortgages plc) it's a formal mortgage offer - just needs signatures, we never had any info before we got this final offer, our advisor was on holiday etc and didn't give us all that many details prior to us getting this.

You mention nearly a £100 in insurance premiums - what are they covering?

Title indemnity insurance - in case of any 'subsequent defect in the title of the property' it also says it allows the process between the offer and completion to be speeded up?

What your earnings are and debt repayments are?

Partner earns £30,000+ (varies year on year) debt repayments approx £300p/m. I'm at home with the kids.

Is there a reason why you would not want to clear the debt before your next mortgage?

Our last fixed rate mortgage was running out, so we had to remortgage anyway and we need a bigger place since having our new baby so we thought we might as well go for it now, rather than holding off another 3 years. Also, the debt is manageable, would take a while to clear, and again I wasn't keen on waiting that long.

Amber07

dwsjarcmcd wrote: »

Also is your broker adding anything to the fee? £1649.50 seems a funny number for a lender to charge (even on a % basis)

We are paying the broker £200 seperately (reduced from £400 apparently) but I read in the offer that the mortgage company are paying the amount of £952.50 for the introduction of the mortgage between 3 parties, of which the mortgage advisors company is one.

Amber07

herbiesjp wrote: »

Have you had a survey done yet?

Survey has been done on the property at the beginning of Oct - we got a copy of it yesterday and everything is fine.

Just to confirm that arrangement fees have increased a great deal, so that could well be the case for the deal you selected

Yeah, I did assume things would increase - just didn't expect it to be quite so drastically, so got a bit of a surprise.:o

Is the £9k debt just one loan, or is it loans and credit cards? Can you give a breakdown?

That's the one defaulted debt. Other debts are around £4,000 but none are defaulted.

What are your two incomes? Are you both employed with payslips to verify the income?

Only my partner works, I am at home with the children. He earns £30,000+ variable, and have payslips to verify.

Are you paying a fee directly to the broker also?

£200

homer_j_3

You have to remember that the monthly payment you make to your creditors will reduce the income of your other half. It could be worth considering paying this off and then looking to put less down toward the next property and then overpaying (or reducing term) to save you loads in interest.

Redstone are a balance sheet lender, so their rates and funding will be affected by the recent credit crunch. There are lenders that will ignore defaults completely but with income multiples being restricted, this could be something worth giving more thought to.

I cant believe that your adviser didn't give you a key features illustration and he charges a fee (sorry just a little playful dig at one of the other brokers on here). Seriously, if the illustration had been provided you would have seen the fees a lot sooner and been able to question them.

What was the product/deal that was sourced for you?

herbiesjp

I would personally look to clear the outstanding debts outright, and put less of a deposit - so your mortgage will need to increase by £14k to £89k

This will still mean being under 75% borrowing, and will mean that any lender will be able to use your partner's full income.

Looking at it this way, may open up a few more doors for you, as it improves your affordability in the eyes of the lender. The rates may be slightly cheaper, although the fees could be the same or less, depending on how recent the default was

However based on your timescales, not sure if this is a route you want to go down. How long ago was the default registered?

Dan_Collins_2

I am not so sure that the rate can be beaten but we cant see your credit file so we shall never know!

The broker is being lazy becasue your a recomended client. He should have given you a KFI before you applied let alone get a mortgage offer!

I am also guessing he went via a packager, Beacon are a lender that a packager would use more so than direct. They would have dont a credit check and in most cases giving him a choice of 3 deals. He has gone for rate over term and fees. Thing is you have no time but I would want to see his research. He should have a copy so just ask becasue he should have given it to you anyway!

Balance sheet lenders are actually a better bet than say GMAC who sell mortgage books on to make money. You are less likely to be affected by the credit crunch because they wont be trying to sell the books on.

You broker is in my opinion a typical fee charging lazy so and so. Probably not bad avice just lazy service.

I also would think about getting rid of your debt.

Amber07

homer_j wrote: »

I cant believe that your adviser didn't give you a key features illustration and he charges a fee (sorry just a little playful dig at one of the other brokers on here). Seriously, if the illustration had been provided you would have seen the fees a lot sooner and been able to question them.

What was the product/deal that was sourced for you?

Tbh, my partner dealt with the mortgage side of things, but we were given very little info on the mortgage until it arrived in the post (took 3 weeks just to find out that the rate was 6.2%!

Not sure what you mean by the product/deal that was sourced??Do you mean the mortgage offer that I first mentioned? Because that's all that he has found for us.