Mortgage broker - ask me anything

Myci85

K_S said:

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.

That's what I feared. He doesn't yet have an extension of contract as it is funding dependant. A previous broker told us that they should be fine with it right up to the end of his current contract as he has 12 months+ contracting history, but that broker was rubbish so I'm not banking on it.

 So frustrating as we have wasted almost a month waiting for Skipton to make a decision, with them asking for extra things each time we thought we'd given everything they needed, only for them to decline it anyway. 

K_S

Myci85 said:

K_S said:

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.

That's what I feared. He doesn't yet have an extension of contract as it is funding dependant. A previous broker told us that they should be fine with it right up to the end of his current contract as he has 12 months+ contracting history, but that broker was rubbish so I'm not banking on it.

 So frustrating as we have wasted almost a month waiting for Skipton to make a decision, with them asking for extra things each time we thought we'd given everything they needed, only for them to decline it anyway. 

@myci85 Accord - tbh I haven’t come across the ‘2 month’ minimum with them. But from a lender’s point of view, you can see why they’re reluctant to lend on an FTC ending in <2m with no evidence of a renewal or a new contract with a different employer. Irrespective of what the published criteria says, in these kind of cases, the underwriter has a good level of discretion that they can apply, whether that is to push the case through or to decline it.

If you have 2 years of continuous employment (doesn’t need to be on an FTC) prior to the application, in the field that your contract is in, Halifax is pretty good with new/ending FTCs though they dial down the salary to 46/52 so can impact max borrowing. 

Skipton - I can see why they declined it but am surprised to hear that it took a month, especially if it was basically down to the contract. Usually what the broker does in this kind of case is get their Skipton BDM to run the pertinent points of the case past an underwriter to get their opinion, and only then go ahead with recommending Skipton. Skipton BDMs are pretty good and will give a frank opinion on a case.

jen_fpb

silvercar said:

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.

@silvercar sorry. I'm still not understanding are you able to explain a bit more with a worked example?

silvercar

jen_fpb said:

silvercar said:

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.

@silvercar sorry. I'm still not understanding are you able to explain a bit more with a worked example?

Say your interest rate is 5% and your mortgage is £200k.

Assume fully offset.

Interest only. The interest charged would be £833 a month if you were not offsetting at all, but you are offsetting fully so you pay nothing. End of 2 years the mortgage balance is still £200k and you've paid nothing for 2 years. Effectively the money is there waiting for you if you want to take it out and start paying interest on it. 

Repayment mortgage. (a) monthly repayments would be £1,169 a month. You are fully offset, so all that money would go to repaying the capital borrowed. At the end of 2 years, you would have repaid 24 x 1,169 = approx 28k. so your outstanding balance would be £172k. (b) (Some lenders may instead allow you to make reduced monthly repayments, based on not paying the interest on the offset balance and so would charge you less per month and the remaining balance owed would then be higher eg reduced repayments of £336 as no interest charged, so the balance reduces to £192k at the end of 2 years). Either way the balance owed on the mortgage drops and your savings in the offset mortgage stay intact. 

Thinkandgrow1

Hi Does anyone know if once NatWest do hard credit search this means they are in underwriting process or are they just collecting info to pass to underwriters?

Thanks 

K_S

Thinkandgrow1 said:

Hi Does anyone know if once NatWest do hard credit search this means they are in underwriting process or are they just collecting info to pass to underwriters?

Thanks 

@thinkandgrow1 It means that the case has been keyed in, which NatWest call ‘pre-underwriting’.

You can get an idea of the stages/phases here
https://www.intermediary.natwest.com/intermediary-solutions/service-levels.html

Thinkandgrow1

K_S said:

Thinkandgrow1 said:

Hi Does anyone know if once NatWest do hard credit search this means they are in underwriting process or are they just collecting info to pass to underwriters?

Thanks 

@thinkandgrow1 It means that the case has been keyed in, which NatWest call ‘pre-underwriting’.

You can get an idea of the stages/phases here
https://www.intermediary.natwest.com/intermediary-solutions/service-levels.html

Thanks. Nervous process. Guess I will hear more next week 

stampystamp

We’ve applied with NatWest too. Application went in on Tuesday and our broker said we should hear something by end of today or early next week.

jen_fpb

silvercar said:

jen_fpb said:

silvercar said:

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.

@silvercar sorry. I'm still not understanding are you able to explain a bit more with a worked example?

Say your interest rate is 5% and your mortgage is £200k.

Assume fully offset.

Interest only. The interest charged would be £833 a month if you were not offsetting at all, but you are offsetting fully so you pay nothing. End of 2 years the mortgage balance is still £200k and you've paid nothing for 2 years. Effectively the money is there waiting for you if you want to take it out and start paying interest on it. 

Repayment mortgage. (a) monthly repayments would be £1,169 a month. You are fully offset, so all that money would go to repaying the capital borrowed. At the end of 2 years, you would have repaid 24 x 1,169 = approx 28k. so your outstanding balance would be £172k. (b) (Some lenders may instead allow you to make reduced monthly repayments, based on not paying the interest on the offset balance and so would charge you less per month and the remaining balance owed would then be higher eg reduced repayments of £336 as no interest charged, so the balance reduces to £192k at the end of 2 years). Either way the balance owed on the mortgage drops and your savings in the offset mortgage stay intact. 

Thank you!

This makes sense.

If we do interest only do we just choose how much we want to pay each month? Is there any point in 100% offsetting on an interest only mortgage? 

silvercar

jen_fpb said:

silvercar said:

jen_fpb said:

silvercar said:

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.

@silvercar sorry. I'm still not understanding are you able to explain a bit more with a worked example?

Say your interest rate is 5% and your mortgage is £200k.

Assume fully offset.

Interest only. The interest charged would be £833 a month if you were not offsetting at all, but you are offsetting fully so you pay nothing. End of 2 years the mortgage balance is still £200k and you've paid nothing for 2 years. Effectively the money is there waiting for you if you want to take it out and start paying interest on it. 

Repayment mortgage. (a) monthly repayments would be £1,169 a month. You are fully offset, so all that money would go to repaying the capital borrowed. At the end of 2 years, you would have repaid 24 x 1,169 = approx 28k. so your outstanding balance would be £172k. (b) (Some lenders may instead allow you to make reduced monthly repayments, based on not paying the interest on the offset balance and so would charge you less per month and the remaining balance owed would then be higher eg reduced repayments of £336 as no interest charged, so the balance reduces to £192k at the end of 2 years). Either way the balance owed on the mortgage drops and your savings in the offset mortgage stay intact. 

Thank you!

This makes sense.

If we do interest only do we just choose how much we want to pay each month? Is there any point in 100% offsetting on an interest only mortgage? 

We’ve been 100% offsetting for years, occasionally dipping into the savings when we need to and then building it back up. 2 big pluses:

1.  The value of 100% offsetting is that the money is there to be taken if you need it, so it can be your rainy day money. Whereas you may not want to not have a mortgage and to have no savings.

2. The value in offsetting vs taking a mortgage and having a savings account elsewhere is the interest rate difference eg if you can borrow at near the rate you are getting on savings, especially for a higher rate tax payer, it makes sense, particularly taking together with the above point. There is no interest paid to you on an offset, so you won’t be hit with a tax bill as you would on a savings account. Eg £200k in an offset with a 5% interest rate costs you nothing in interest. Take a plain mortgage at 5% and you would pay interest of £10k a year (simple calculation, I know repayments make this a slightly different number). Savings of £200k in a fixed rate of 5% would pay you £10k, but you would pay tax on 9k of that at your marginal tax rate so would lose £3,600 (higher rate 40% tax) of it leaving you with £6,400.