Mortgage broker - ask me anything

K_S

longtimelurker2020 said:

If you’re buying a doer-upper, can you borrow a bit more at the time of the mortgage application, to fund home improvements? Are lenders open to this, or would one have to wait until the fix ends and it’s time to remortgage? 
The only other option I can think of is to hold back cash from the (40%) deposit and then borrow more, but my thinking is that keeping the deposit intact puts us in an LTV band for a low interest rate. 
What do the brokers think? 

@longtimelurker2020 If you're talking about maisntream lending for a standard purchase, it's the latter - hold back cash and borrow more (if possible). You could potentially take out a low/no ERC product, do your home improvements and then remortgage after 6 months.

What you have described isn't uncommon at all, and that's what most of my clients in your situation do.

What you want to try to avoid is putting all your deposit in the purchase, buying the house at low-LTV, using expensive/short-term finance to do the home improvements (often running over budget) and then end up struggling to remortgage because of excessive debt in the background. That scenario comes up often on this forum.

K_S

daffodil02 said:

Does anyone have experience of how lenders have viewed the third SEISS grant please? The criteria was different to one and two, I spoke to a broker but he said it may be a problem. 

@daffodil02 Setting aside the few lenders (such as NatWest) who have blanket decline policies, the SEISS grants themselves are rarely the issue. What the lender wants to know is whether you are back in business, whether your profits are close to the historic figures, etc. If you meet those requirements, you should be able to find lenders willing to lend.

daffodil02

@K_S thank you for your response. I spoke to a broker today who seemed to think it was a big issue due to the third saying a ‘significant reduction’. My partner claimed it as he lost a big chunk of newer business that couldn’t be done due to restrictions, but still has his main client with regular monthly invoices that are similar to pre-pandemic levels with monthly invoices to back it up.

K_S

daffodil02 said:

@K_S thank you for your response. I spoke to a broker today who seemed to think it was a big issue due to the third saying a ‘significant reduction’. My partner claimed it as he lost a big chunk of newer business that couldn’t be done due to restrictions, but still has his main client with regular monthly invoices that are similar to pre-pandemic levels with monthly invoices to back it up.

@daffodil02 Every case is different so it's hard to give a general comment. I placed a client who took SEISS 3 but his profit over the year has turned out to be significantly higher than the prior year. The lender has paused the application pending submission of 2020/21 SA302s and accounts which the client will get done right after year-end next week. Once that's submitted and reviewed, I expect the case to go to offer.

That would be different from your partner's case where it looks like the 2020/21 (I'm assuming they're a sole trader) profits are going to be significantly down on the prior year. Is that correct?

If the lender were to consider only their 2020/21 profits for income, would you meet affordability?

daffodil02

Hi @K_S I see what you mean, it’s a tricky one. Maybe he should get his 2020/1 books done soon so it’s less speculative. I don’t expect too much different in net profit from year to year so should still be affordable.

longtimelurker2020

K_S said:

longtimelurker2020 said:

If you’re buying a doer-upper, can you borrow a bit more at the time of the mortgage application, to fund home improvements? Are lenders open to this, or would one have to wait until the fix ends and it’s time to remortgage? 
The only other option I can think of is to hold back cash from the (40%) deposit and then borrow more, but my thinking is that keeping the deposit intact puts us in an LTV band for a low interest rate. 
What do the brokers think? 

@longtimelurker2020 If you're talking about maisntream lending for a standard purchase, it's the latter - hold back cash and borrow more (if possible). You could potentially take out a low/no ERC product, do your home improvements and then remortgage after 6 months.

What you have described isn't uncommon at all, and that's what most of my clients in your situation do.

What you want to try to avoid is putting all your deposit in the purchase, buying the house at low-LTV, using expensive/short-term finance to do the home improvements (often running over budget) and then end up struggling to remortgage because of excessive debt in the background. That scenario comes up often on this forum.

Thank you, very helpful 

T_J_A_8691

Good morning, 
Looking for advise, we have put the house on the market-expect £30,000 towards deposit on our new home.(after fees etc)
What mortgage level could we expect?
My salary £24,000
Partners salary £41,500 basic but has to be on call throughout the year(every 7/8 weeks) this is an extra £2500 if being conservative.
CHB £1100 approx per year( it is slightly more) 1 child.15 yo
Oldest applicant 52.5 so would need a 16 year mortgage.
1 credit card each both at £4150 but will be around £3900 when we are ready to apply.we do have 1 more each but these will be paid this month and remainder in May.
No adverse / late payments -credit scores clear 
Should we be looking at getting the MIP / AIP now before the house sells?
Many thanks for reading.

K_S

T_J_A_8691 said:

Good morning, 
Looking for advise, we have put the house on the market-expect £30,000 towards deposit on our new home.(after fees etc)
What mortgage level could we expect?
My salary £24,000
Partners salary £41,500 basic but has to be on call throughout the year(every 7/8 weeks) this is an extra £2500 if being conservative.
CHB £1100 approx per year( it is slightly more) 1 child.15 yo
Oldest applicant 52.5 so would need a 16 year mortgage.
1 credit card each both at £4150 but will be around £3900 when we are ready to apply.we do have 1 more each but these will be paid this month and remainder in May.
No adverse / late payments -credit scores clear 
Should we be looking at getting the MIP / AIP now before the house sells?
Many thanks for reading.

@t_j_a_8691 Quick thoughts -

- CHB is likely to be ignored due to the child's age

- A 30k deposit, assuming a max LTV of 90% gives you a budget of about 300k. On a 17 year term, you should be able to borrow the 270k you need taking only the basic pay (24k+41.5k) into account 

- With a 95% LTV mortgage you may be able to stretch a bit more at a higher cost.

Personally, I only ever recommend an AIP/DIP for a client at a stage where it's actually needed. In most cases EAs are happy with the broker confirming that the applicants are good for the offer.

Studio150

Hello
I wondered if someone could offer advice please?  My partner and I are first time buyers and are currently in the process of comparing mortgages.  We are looking at 2 year fix term currently but the best rate available (with TSB) comes with a £999 product fee, no cashback incentive.  The mortgage illustration provided by our MB does not reference any option to build the fee into the mortgage loan and we intend to speak to him to see if this might even be an option.  I spoke to TSB earlier today and they implied it would be though I didnt ask whether there is a specific criteria in which they agree to this.  Our situation is as follows
- property is valued at £248,000 and we are putting a deposit down of £37,500.  The rate we are looking at is 2.49% over two years. The full term of the mortgage is 30 years.  How much per month would a built in fee add to our payments? 

My second question is ....
Virgin appear to do a better deal in terms of interest rates, but this shoots up rapidly after the 2 year term is over.  Their fees are also around the £999 mark, but offer a £1000 cashback - effectively this would pay those fees.  Our MB has suggested we opt for this and then remortgage after 2 years - my worry here is that we might not get find a better rate if our circumstances were to change during that time, i.e. we hope to have a child in the next year or two.  Can anyone advise as to whether this is likely to have a significant impact on rates available to us?

Many thanks in advance for any help or advice

K_S

Studio150 said:

Hello
I wondered if someone could offer advice please?  My partner and I are first time buyers and are currently in the process of comparing mortgages.  We are looking at 2 year fix term currently but the best rate available (with TSB) comes with a £999 product fee, no cashback incentive.  The mortgage illustration provided by our MB does not reference any option to build the fee into the mortgage loan and we intend to speak to him to see if this might even be an option.  I spoke to TSB earlier today and they implied it would be though I didnt ask whether there is a specific criteria in which they agree to this.  Our situation is as follows
- property is valued at £248,000 and we are putting a deposit down of £37,500.  The rate we are looking at is 2.49% over two years. The full term of the mortgage is 30 years.  How much per month would a built in fee add to our payments? 

My second question is ....
Virgin appear to do a better deal in terms of interest rates, but this shoots up rapidly after the 2 year term is over.  Their fees are also around the £999 mark, but offer a £1000 cashback - effectively this would pay those fees.  Our MB has suggested we opt for this and then remortgage after 2 years - my worry here is that we might not get find a better rate if our circumstances were to change during that time, i.e. we hope to have a child in the next year or two.  Can anyone advise as to whether this is likely to have a significant impact on rates available to us?

Many thanks in advance for any help or advice

@studio150

1. You should be able to add the fee to the loan. The broker will send an updated illustration which will show the exact amount. It's unlikely to add more than a few quid per month.

2. If your financial circusmtances were to change to a degree than you would struggle to remortgage (move to a different lender), you should still have the option of doing a product switch to another virgin product. Typically, this involves no income verification, no credit checks, no affordability assessment, etc. You may not get the most competitive deals in the market, but Virgin being a mainstream lender, the options available should still be competitive.