Why is my broker reluctant to get me 95% LTV?

jazzyja

So I'm in the process of buying. Got my own DIP from a high street bank for 5%. I went to a broker as I've not the foggiest where to start. He said this bank has rubbish rates so ive not bothered to proceed with the bank. I'm struggling to find a house that's ideal for me and in my budget for 10% deposit. Asked my broker if we could perhaps look at 5% but still of course keep in my affordability limit. He just says 10% is a better option and we should still aim towards that. But surely if I want a property that I don't have the full 10% for its my decision to go ahead? I do trust him but also why is he so reluctant? Is it a commission thing?
My credit report is clean for the last 3.5 years.....some missed payments before that. Only debt I have is car finance which is 5k. Is there something he's not keen on with that? I dont want him to think im being off hand about it so ive no actually said anything! But surely if the bank say they'd offer me 5%?? Only other thing is, are my bank statements abit rubbish and il be scrutinised for that?? Not sure what to do!

gozaimasu

Be careful with this broker. Have you paid him a fee yet?

It doesn't sound like he is a whole of market independent broker otherwise he would probably have the product that you already got a DIP for, so it seems that he is trying to get a bigger commission from you.

Consider trying (the IMHO terrible) London & Country broker that is recommended by MSE who won't charge you a fee and should be able to offer you 5% mortgages.

Walker1

What do you mean your bank statements are a bit rubbish? Just curious.

getmore4less

All the 95% rates are rubbish  and still limited saw one lender only have 5y fix where 2y is probably the better choice.

Which bank and rate was it?
can see if they are any worse than the others.

10% is obviously better but what do the numbers look like and cash flow to get that LTV better quickly.
Many  95% are around the 4% mark and the 90% creep towards 3.5 with 85% closer to 3%

These are all very high compared to pre covid and  not only are you borrowing more the rate is higher on all of it meaning less to start eating into the debt.

if you look at say 4% V 3.5% on a per £100k basis over say 30years on 2year fix paying the same amount 

amount	rate	payment	owing	interest
£95,000.00	4.00%	£453.54	£91,585.87	£7,470.94
£90,000.00	3.50%	£453.54	£85,257.80	£6,142.87

That 95% is costing an extra £1,300 over 2 years that almost 3 extra payments not paying down the debt.
 

K_S

@jazzyja I'm assuming this is a whole of market broker. I think it's probably crossed wires more than anything else.

- There is no difference in the "commission" (called a procuration fee paid by the lender to the broking firm) on a 95% LTV mortgage or a 90% LTV mortgage. All that matters is the loan size.

- The broker has a duty to recommend the most cost-effective option and one which has the best chance of getting you a mortgage. There are significant differences in cost between 90% and 95% products, and underwriting at 90% is less strict than at 95%. So it isn't illogical for him to push you towards the option that is cheaper and more likely to succeed.

- Ultimately, if you need to buy a property and only have a 5% deposit, I'm confident he will recommend a suitable product that you are eligible for, that's his job. But he can't simply use your DIP or apply for the lender you want because that will be deemed as 'execution-only' service which the vast majority of brokers cannot do.

You always have the option of progressing your direct DIP without using a broker.

ACG

If you do not have a 10% deposit tell them you do not have a 10% deposit and can only proceed on the 95% products. They will either agree to it or not.

jazzyja

Walker1 said:

What do you mean your bank statements are a bit rubbish? Just curious.

Well, I'm probably being paranoid, as he hasn't said anything about my statements.
When I look through there just appears to be so many transactions! Like I'm constantly spending, but really it's just because I never withdraw cash. Also my boyfriend pays half the bills and transfers me money, I thought they might not like this because he's not going on the mortgage (for personal reasons). But again, I'm probably over thinking! I have an overdraft but I'm never in it and my balance is good.

jazzyja

I suppose the main reason I dont want to progress by myself with the DIP is because I'm worried. It's my first time, I would rather someone who's an expert in the field help me. I've seen a property I like but I have just less than 10% and I have no money or savings to stretch any higher, but he kind of doesn't want it lower than 10.
I mean I can just go ahead and try myself but that just means a hard search and potentially getting no where. I'm confident he can get me one, as he does have a good reputation.

Thrugelmir

What's your potential price for the property? 
How long would it take you to get up to a 10% deposit at your current rate of saving? 

K_S

jazzyja said:

I suppose the main reason I dont want to progress by myself with the DIP is because I'm worried. It's my first time, I would rather someone who's an expert in the field help me. I've seen a property I like but I have just less than 10% and I have no money or savings to stretch any higher, but he kind of doesn't want it lower than 10.
I mean I can just go ahead and try myself but that just means a hard search and potentially getting no where. I'm confident he can get me one, as he does have a good reputation.

@jazzyja Fair enough. Bottom line is that if you can't (or don't want to) stretch to a 10% deposit, and you are potentially eligible for at least one 95% product that allows you to borrow what you need, then there is literally no reason for the broker to not progress. There is nothing for him to gain by that.

Tell him that you only want to put down a 5% deposit, get a realistic budget from him on that basis and then just go on with your viewings. Once you have an offer accepted then ask him to get on with getting you a mortgage.

Having said that, do keep in mind that the difference in your max budget budget with a 95% mortgage and a 90% mortage is not going to be just the 5% extra deposit. Lenders who will lend you a maximum of 4.75x/5x income at 90% LTV may drop to 4.5x at 95% LTV.

jazzyja

Thrugelmir said:

What's your potential price for the property? 
How long would it take you to get up to a 10% deposit at your current rate of saving? 

Potential price is 140k, I view next week. I only have 13k. I would have an extra 1k by the end of June. By then house will of probably gone. I've already lost 2 to other buyers before I've even viewed. I am in a rush as the house I'm in is no good at all and causing me a ton of issues.