lending for remortgage less than original loan, sign of the times?

Dr_Wu

Hi, sorry if I'm a little short of exact detail here but I thought I would share my daughter's recent experience and see if the folks here could make any sense of it.

Basically she got her first mortgage through the Nationwide about 3 years ago, soley on her salary. House was valued at approx £120K, mortgage was for about £90K (savings made up the rest).

She's had no problems paying the mortgage and has since found a new job paying approx 33% more salary than the time of the original mortgage. Her partner (who is self-employed) now has sufficient income through audited accounts for a couple of years to contribute to a joint mortgage.

She has recently seen somewhere (next step on the ladder) she likes and contacted the Nationwide asking how much they would now be prepared to lend. The answer?? £80K !! That's total, not on top of the existing outstanding loan!....£80K??

So, what I can't understand is why they have offered her a smaller mortgage when she is on approx 33% more salary (think she's on about £36K now) and her partner will be part of a joint mortgage? (don't know his exact earnings but they will easily be on £30K more between them than the time of the original mortgage)

Apparently the attitude of the NW customer mortgage advisor was quite unhelpful and dismissive so it was hard for her to get a clear explanation from them.

She is apparently tied into the NW mortgage for another 18 months or so with (I believe) an early exit fee.

Any thoughts or possible explanation would be really welcome, is it really just another 'Covid thing' or are we missing something?

As always, thanks in advance

Thrugelmir

Dr_Wu said:

Apparently the attitude of the NW customer mortgage advisor was quite unhelpful and dismissive so it was hard for her to get a clear explanation from them.

The advisor doesn't set the lending criteria. 

Something is awry. There's something you haven't been told I would suggest. 

davidmcn

It would make more sense for her to post here than you, given she'll have all the relevant details and you've obviously only got half the story.

MovingForwards

Children? Credit / store cards? Loans? Lease / PCP / HP car? 

Has her partner had the self-employed grants or bounce back loan?

You haven't been given all the information, a key bit has been left off which will explain why there's a difference between wages and amount they would potentially lend.

ACG

Her partners wage will be averaged over the last 2 years. If it was £10k and £30k, that means his income is £20k (sorry for teaching you averaging haha). His income may not be as high as expected. Did the partner claim any government support during lockdown? That may be preventing nationwide from using some or all of his income. If his business is still not trading or trading properly now, his income may be ignored completely. 

Your daughters wage, is it all basic or is there an element of bonuses/commission/overtime etc? In the current climate, lenders are reluctant to take anything beyond basic wages. 

Do they have children? 
Do they have debts (loans/credit cards?)

flashg67

I had the same with Lloyds - it was an issue relating to my partner's self employed income that did for me. No issues with the lender I went for next though. Self employed income is being scrutinised closely at the moment it seems

Dr_Wu

Nope, no debts (credit cards are cleared every month) no kids, Daughter does get a bonus but mortgage is based on basic. car paid for outright and both have good credit scores. I do wonder about the partner's self employed income like flashg67 mentioned, but even then, it doesn't really explain why the offer is less than it was 3 years ago. I think she might look at talking to a mortgage advisor. Thanks for all the input so far, they are all questions that have to be asked.

ACG

If his income is not being accepted, there are then 2 applicants and only 1 income, but to be honest that is still a big drop if that is the issue.

I could be wrong, but I would put money on there being something you have not been told about. There are only so many things that would reduce the mortgage amount by that much.

Grumpy_chap

Banks have strange and often arbitrary criteria for lending at even the best of times. 
At the tail end of 2015, I wanted to re-mortgage with my current lender to a more competitive product and I was refused even though I did not want to increase the amount borrowed.  The criteria I was advised was that the bank had introduced a minimum salary level and if your salary is lower than that level they won't offer a product.  Full Stop.  My salary is lower than the arbitrary level and so I could not re-mortgage, even though I was maintaining all the payments and affordability increases with the lower interest rate.

These are not the best of times, and many lenders are applying very strict criteria.
Did your daughter's partner qualify for and claim any of the grants (SEISS), or loans (BBLS)?  If so lenders may say that the 2 year's accounts are not sufficient as the criteria for the grants / loans is a self-declaration that the business has been impacted by COVID.  If the bank is unable, or unwilling, to look into this to understand the position, the bank may simply right the partner's income down to zero for assessment purposes.  That is then worse than simply doing the assessment on your daughter's salary as the bank will take her single salary but assume supporting two adults rather than one and affordability then nose-dives.

Has you daughter considered using a mortgage broker?

Dr_Wu

Grumpy_chap said:

These are not the best of times, and many lenders are applying very strict criteria.
Did your daughter's partner qualify for and claim any of the grants (SEISS), or loans (BBLS)?  If so lenders may say that the 2 year's accounts are not sufficient as the criteria for the grants / loans is a self-declaration that the business has been impacted by COVID.  If the bank is unable, or unwilling, to look into this to understand the position, the bank may simply right the partner's income down to zero for assessment purposes.  That is then worse than simply doing the assessment on your daughter's salary as the bank will take her single salary but assume supporting two adults rather than one and affordability then nose-dives.

Has you daughter considered using a mortgage broker?

Yep! See my most recent post (I used the term advisor but essentially meant broker), your post makes a great deal of sense though as he was able to obtain some sort of 'grant' during lockdown, much appreciated.