Mortgage broker - ask me anything

K_S

jen_fpb said:

Did try a separate post a while back but hoping you can help explain/clarify.

We are currently looking at an offset mortgage. We will end our current "deal" early and move to an offset as financially it works out better. ERC on current deal would be about £500.

We are offsetting as we are able to 100% offset. We have £59,300 mortgage and have enough to 100% offset so we will have an 0% interest rate.

We have seen one 5 year offset that has unlimited overpayment but still has an ERC of 

5% reducing to 2% gradually over the 5 years. The mortgage allows unlimited (99.9%) overpayments.

This example is with Yorkshire Building Society.

There is a chance through inheritance possibly coming that we could overpay a HUGE chunk of the mortgage in say 2 to 3 years time (5 year deal). What would happen if we reduced this to say £5,000 and we still have 2 years left. We wouldn't want an ERC would we just pay £5,000 divided by the remaining term? And end up with small monthly payments?

It does have an exit fee, what's this?

@jen_fpb I don’t know the YBS product specifically, but generally speaking -

When the balance is very low - Usually the borrower can choose an option which reduces their monthly payments to match the term of their mortgage so you won’t pay off the mortgage early and incur an ERC.

Exit fee - standard fee that some lenders charge when a mortgage is redeemed. It can be as low as zero and as high as £200+ depending on the specific lender. When comparing costs, treat it as an unavoidable component.

A few points to think about -

- do you need access to the money. If so, how much of it do you need access to?

- you have a relatively low balance so any fees is going to constitute a significant % (£500 is almost 1%, a 1k lender product fee would be almost 2%, etc) so do make sure you do your calcs throughly when factoring in the ERC on the current product, any lender product fee on the offset product, your current rate vs what you can get in a cash ISA or savings, etc.

- depending on how low you will take the offset balance to, and what your plans are, it might be worth looking at offset interest only as well.

jen_fpb

Thanks both.

Have been looking at fee free as because we are 100% off setting the interest rate isn't mich of a concern. 

Unsure on your last point about how low we want to take the balance and interest only, are you able to explain?

silvercar

jen_fpb said:

Thanks both.

Have been looking at fee free as because we are 100% off setting the interest rate isn't mich of a concern. 

Unsure on your last point about how low we want to take the balance and interest only, are you able to explain?

If you are interest only, you have no monthly repayments to make if fully offset. So how low you want the balance to be is effectively the maximum amount you want available to you, if you suddenly needed access to the money. 

If you have a repayment mortgage then you are repaying the capital each month, so the balance would naturally fall over time.

stampystamp

Hi there! How often are properties being down valued by lenders at the moment? We have just applied for a mortgage (£285,000 offer accepted, borrowing £225,000 with a £60,000 deposit). No adverse credit, no missed payments ever. If we they do down value, I’m assuming we would have to stump up the difference or negotiate the price down with the seller? 

K_S

stampystamp said:

Hi there! How often are properties being down valued by lenders at the moment? We have just applied for a mortgage (£285,000 offer accepted, borrowing £225,000 with a £60,000 deposit). No adverse credit, no missed payments ever. If we they do down value, I’m assuming we would have to stump up the difference or negotiate the price down with the seller? 

@stampystamp Couldn’t give any useful info on how likely it is but generally speaking, based on my limited view as a one-person band, I’ve seen much less compared to the period during the Covid frenzy.

If it’s downvalued your options are -
— renegotiate with the vendor
- adjust the deposit/mortgage/LTV to make it fit

Your options will depend on what LTV you’re at and how big the downval is.

For example in your case you’d need a pretty hefty down valuation to force you to add more cash to the 60k deposit.

For example, worst case scenario assume it’s down valued to 250k, the vendor refuses to move at all, you want to proceed and have no cash to add. From the lender’s point of view 

House value is now 250k
Loan size is 225k (90% of 250k)
LTV goes up from 80% to 90%

Your deposit stays exactly the same 60k and (as long as the case qualifies for 90% LTV), you don’t need to add a penny.

Alternatively, you can try another lender (one that uses a different surveyor panel to the first one) and it’s quite possible that they return a different number to the first one, happens more often than you would think!

stampystamp

Amazing - thank you so much. I’m really hoping that the house would not be down valued by that much. A house in the same street sold for £255,000 in March and it has one less bedroom, not renovated and no parking (ours has a drive large enough for 3 cars). I know they look at a number of comparable properties within a certain distance but there is such a range of sold prices in the area. We do have more funds available (up to 20k) but ideally don’t want to use this (although will if we have to!) We did offer over the guide price at 275k as there was a bidding war with a cash buyer but only because we knew we had the extra in cash. It’s really good to know we can potentially just alter the LTV ratio if needed.

Do you happen to know how long NatWest are taking at the moment? Our application went in at the beginning of the week (via broker)

K_S

stampystamp said:

Amazing - thank you so much. I’m really hoping that the house would not be down valued by that much. A house in the same street sold for £255,000 in March and it has one less bedroom, not renovated and no parking (ours has a drive large enough for 3 cars). I know they look at a number of comparable properties within a certain distance but there is such a range of sold prices in the area. We do have more funds available (up to 20k) but ideally don’t want to use this (although will if we have to!) We did offer over the guide price at 275k as there was a bidding war with a cash buyer but only because we knew we had the extra in cash. It’s really good to know we can potentially just alter the LTV ratio if needed.

Do you happen to know how long NatWest are taking at the moment? Our application went in at the beginning of the week (via broker)

@stampystamp Honestly, you’re probably worrying about nothing!

Current NatWest timelines https://www.intermediary.natwest.com/intermediary-solutions/service-levels.html

stampystamp

K_S said:

@stampystamp Honestly, you’re probably worrying about nothing!

Current NatWest timelines https://www.intermediary.natwest.com/intermediary-solutions/service-levels.html

As my husband keeps telling me 🤣

thank you so much again!! 

Myci85

Hello, 

We're back to the drawing board on house hunting after offering on a house that one lender wouldn't lend on due to single skin brick, and the second lender wouldn't lend to us due to my partner's fixed term contract having little time left and no guaranteed extension yet. 

The first lender confirmed they were happy with our application but not the house, and it was 8th April they declined. If we were to put an offer on another house now and go through them again for mortgage, do you know if they'd re-open our previous application, or start a new one? Reason for asking is 2 fold. One, their mortgage rates have increased since our original application went in, and two, where my partner had almost 4 months left on his contract previously, he now has just gone past the 2 months remaining which this lender stipulate on their criteria.

Lender is Accord.

K_S

Myci85 said:

Hello, 

We're back to the drawing board on house hunting after offering on a house that one lender wouldn't lend on due to single skin brick, and the second lender wouldn't lend to us due to my partner's fixed term contract having little time left and no guaranteed extension yet. 

The first lender confirmed they were happy with our application but not the house, and it was 8th April they declined. If we were to put an offer on another house now and go through them again for mortgage, do you know if they'd re-open our previous application, or start a new one? Reason for asking is 2 fold. One, their mortgage rates have increased since our original application went in, and two, where my partner had almost 4 months left on his contract previously, he now has just gone past the 2 months remaining which this lender stipulate on their criteria.

Lender is Accord.

@myci85 Based on what you’ve said, it’ll be a new application, you’ll have to select a current product and it’ll be underwritten again. Accord are pretty good with high-income/professional contracts, as long as you can evidence a new contract or an extension of the current one, they should consider.