Remortgage 'Modified Affordability' Ruling

nikh667

Hi guys,

As per thread title has anyone here had or heard of any cases whereby a lender has utilised the FCA's more lenient criteria for remortgages - looking at monthly affordability over the more strict long term lending amounts.?

Quoted from the money advice service:

What the new FCA rules mean for you
New rules from the Financial Conduct Authority (FCA) aim to help you if you’re currently making your mortgage repayments but are stuck on expensive mortgages with your existing lender because you have difficulty passing another lenders affordability checks.

Lenders can choose to, but don’t have to, offer what’s called a “modified affordability assessment”. This allows lenders to choose not to apply certain affordability assessment rules. This might include not having to verify your income, consider your future changes in circumstances or apply the interest rate stress test subject to certain conditions.

To use the “modified affordability assessment”, lenders must show the new mortgage is at least more affordable than your present one, tell you how your affordability has been assessed and tell you about any potential risks.

Mortgage lenders can carry out a modified affordability assessment if you:

* Have a current mortgage
* Are up to date with mortgage payments
* Have not missed a mortgage payment in the last 12 months
* Do not have any unpaid fees or charges
* Do not want to borrow more money (excluding fees associated with remortgaging)
* Are looking to switch to a new mortgage deal on your current property.

Whats_your_forte

In a word, yes.

But not fully understanding the reason behind the question. Each lender will be flexible as and when they need to ie Santander and choosing a 5 year deal over say a 2 year deal.

Others will go completely outside the box for business reasons ie provincial building societies

nikh667

Thanks for the reply. My mortgage fixed term that my ex wife and I took out comes to an end in April - we're both still named on the mortgage and deeds. As per our consent order she is coming out of the mortgage either by us selling or me buying her out to the fixed amount we agreed and had sealed in the order. She has not been contributing financially whatsoever since leaving the house in 2018.

All efforts to look at remortgaging in my own name currently with most lenders normal 4x/5x minus credit/maintenance commitments calculation put my remortgage amount well under what is still outstanding mortgage wise on the house - however on a monthly basis I am easily coping, no payments missed, do not need to borrow any more etc... In fact a remortgage at current fixed rates would be even more of a monthly saving over my current 3.58% with TSB (who apparently don't consider this 'modified affordability' either). LTV is around 85% currently.

ACG

I only know of one lender who can look at basing affordability off what you are paying now. It is not quite that simple though, there are a few hoops and restrictions that come with it.

It is a little building society, so not a mainstream lender.

I think what "whats yoru forte" is talking about is lenders who have an affordability calculation which can be more lenient for longer term fixes which might be an alternative as some of those lenders can go to 5x income even after commitments.

I think this will become more mainstream in the next year or 2 but it is a little but early just yet.

Whats_your_forte

I've known cases go through with the Dudley building society sitting at around six times income but these are on a case-by-case basis and usually accompanied by other plausible reasons such as an increased career path which will see earnings gradually rise to fit back within the affordability model within a certain period of time

Options for yourself may be to generate other income which will help support an application to get you over the finishing line but for the lender, this has to be plausible and sustainable.

And yes, as mentioned, Santander will look to increase the loan amount if you choose the five-year option over others and this may become a pattern with other lenders always though in the knowledge that we are in a period of time of interest rates at their lowest and therefore the cap put in by the Bank of England is therefore a reason to make sure that people operate with manageable mortgage payments

nikh667

Many thanks, yes I see what you mean about it all being less mainstream currently. Any further info on who the lenders might be would be helpful to me.

Ultimately it's frustrating as affordability wise I'd be sorted, whereas should I not be able to remortgage I'll have no option to sell the house and go through potential financial expense in doing so - makes little sense but it is what it is.

kingstreet

Nationwide, as of this week;-

Remortgages with no additional borrowing

This refers to clients who have no more than one mortgaged property and are looking to remortgage to Nationwide with no additional borrowing. These applications will be subject to a lower rate stress test than is applied to purchases and remortgages with additional borrowing.

The loan amount requested must be less than or equal to the outstanding mortgage balance with the current lender, although applicants can add Product Fees of up to £1,000 to the loan.

The application won't be eligible for a lower rate stress test if the applicants have more than one mortgaged property or if there's any borrowing to repay an ERC.

No detail provided though.

Thrugelmir

nikh667 wrote: »

Many thanks, yes I see what you mean about it all being less mainstream currently. Any further info on who the lenders might be would be helpful to me.

Ultimately it's frustrating as affordability wise I'd be sorted, whereas should I not be able to remortgage I'll have no option to sell the house and go through potential financial expense in doing so - makes little sense but it is what it is.

Unfortunately thousands of couples find themselves in the same position every year. Your situation isn't the same as being unable to remortgage to a new lender, i.e. trapped with a high interest rate closed legacy lender such as NRAM.

nikh667

With you, thanks guys so far for the advice. I don't suppose there are many lenders still offering 6x as a guideline is there?