🗳️ ELECTION 2024: THE MSE LEADERS' DEBATE Got a burning question you want us to ask the party leaders ahead of the general election? Submit your suggestions via this form or post them on our dedicated Forum board where you can see and upvote other users' questions. Please note that the Forum's rules on avoiding general political discussion still apply across all boards.

Arrangement Fee question - First Time Buyer and Right to Buy

Options
AliceBanned
AliceBanned Posts: 3,048 Forumite
Name Dropper First Anniversary Combo Breaker First Post
in Mortgages & endowments
Hello

I am trying to get a mortgage for a right to buy flat; I have been told by the broker that the lender has accepted my application, and they now need £230 up front for the valuation. 7.64% fixed for two years, 70%LTV; £1500 arrangement fee. I have some bad credit history but from four years ago. Does this all sound reasonable?

Also told by the broker that this is the only offer he could get for me (he is whole of market) and that even in two years' time it will be all I can get - I don't agree and don't see how this could be the case; he thinks I will have to pay £1500 arrangement fee again in two years' time with the same lender, but surely I can then just go for variable rate or anyother lender?!!

The broker sounded ok on the phone and I would just like to go along with this, but don't know whether I should be more cautious? How can the lender accept my application, when they haven't even valued the flat for themselves? I'm sure this is normal procedure but just wanted to check whether anything sounds dodgy; he also recommended I go for three year fixed but I don't want to do this as I think I will get a better rate in two years; time; my credit file should be fab by then!

Also, I have been given the first of two 56 day notice to complete letters from the landlord/freeholder; this may be flexible but it is making me want to grab what mortgage I can and push it through, but the lender is Preferred Mortgages and I've heard they can be slow anyway!

Thanks for any advice - I don't want to be just throwing money at things that won't come to fruition.

Comments

  • Sam911
    Sam911 Posts: 17 Forumite
    Options
    AliceBanned wrote: »
    Hello

    7.64% fixed for two years, 70%LTV; £1500 arrangement fee. I have some bad credit history but from four years ago. Does this all sound reasonable?

    Reasonable ?

    That deal sounds terrible to me, just my opinion though.
  • sammyjammy
    sammyjammy Posts: 7,422 Forumite
    Name Dropper First Anniversary Photogenic First Post
    Options
    What do you mean by bad credit?
    "You've been reading SOS when it's just your clock reading 5:05 "
  • Leon_W
    Leon_W Posts: 1,813 Forumite
    First Post Combo Breaker First Anniversary
    Options
    Sam911. It seems perfectly reasonable for someone who has had credit issues to be charged a higher rate. In fact it is roughly the same level as most high street lenders SVR.

    However, industry rumours abound that Lehman Brothers, the US bank that owns Preferred and Southern Pacific, is closing its doors tomorrow to any new lending so the point may be academic !

    Regards
  • dunstonh
    dunstonh Posts: 116,696 Forumite
    Name Dropper First Anniversary First Post Combo Breaker
    Options
    The deal is terrible for someone with clean credit but is the sort of deal someone with poor credit is likely to get. Indeed, it can be a lot worse.
    Also told by the broker that this is the only offer he could get for me (he is whole of market) and that even in two years' time it will be all I can get - I don't agree and don't see how this could be the case

    Neither you or your broker has a crystal ball but in reality, your broker is closer to the likely scenario than you and is correct in pointing out that things may not be better. Anyone with your mindset two years ago is now facing higher interest rates, dropping house prices and no ability to remortgage and with deals being pulled, people are stuck on variable rates higher than their fixed.
    he also recommended I go for three year fixed but I don't want to do this as I think I will get a better rate in two years; time; my credit file should be fab by then!

    Three years sounds sensible if the payment is affordable. You have confidence in there not being a house price drop, deals being reinstated and your credit improving. However, what are the consequences if that doesnt happen and you end up on SVR?
    The broker sounded ok on the phone and I would just like to go along with this, but don't know whether I should be more cautious?

    It depends on what you mean by cautious. Risking your house on a gamble on future mortgage deals and house prices isnt cautious.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • dekh
    dekh Posts: 237 Forumite
    Options
    No need to rush in, there is still time to shop around. Could you do your own credit check to see if there really is any problems?

    Putting 30% down seems like a good start towards getting a reasonable mortgage.
    :think:
  • AliceBanned
    AliceBanned Posts: 3,048 Forumite
    Name Dropper First Anniversary Combo Breaker First Post
    Options
    sammyjammy wrote: »
    What do you mean by bad credit?
    Thank you all so much for the advice.

    I have a default from an Abbey card four years ago £1600 (outstanding and not asked for by Abbey - in fact they offered me a mortgage a while ago despite this) and one CCJ paid off two years ago £250. Everything else is clear and I have no other debts or credit cards now, but did have over £3.5k in debt on credit cards at one stage. On checkmyfile my rating is bad because of these two and previous debts which are now paid off. These will all leave my file in less than two years' time. I am impatient to buy now as I've rented all my life, but maybe impatience is the only reason I need to do it now! Oh also the fact that the flat is in very basic condition and I don't want to do it up and then pay more for it when i do come to buy.

    The flat is being offered at least £30k below current value or even as much as £40k. It is hard to know for sure but going on upmystreet previous sales it could be more than this, but obviously the market is very changeable. However at £70k for a one bed flat in the south east, in good condition (although concrete build) and spacious, I can't see how the price can drop any lower. An independent surveyor valued it conservatively at £95k as it needs some cosmetic work inside, that's all.
  • AliceBanned
    AliceBanned Posts: 3,048 Forumite
    Name Dropper First Anniversary Combo Breaker First Post
    Options
    dunstonh wrote: »
    The deal is terrible for someone with clean credit but is the sort of deal someone with poor credit is likely to get. Indeed, it can be a lot worse.



    Neither you or your broker has a crystal ball but in reality, your broker is closer to the likely scenario than you and is correct in pointing out that things may not be better. Anyone with your mindset two years ago is now facing higher interest rates, dropping house prices and no ability to remortgage and with deals being pulled, people are stuck on variable rates higher than their fixed.



    Three years sounds sensible if the payment is affordable. You have confidence in there not being a house price drop, deals being reinstated and your credit improving. However, what are the consequences if that doesnt happen and you end up on SVR?



    It depends on what you mean by cautious. Risking your house on a gamble on future mortgage deals and house prices isnt cautious.

    I agree but £1500 arrangement fee every two or three years is quite steep too? It may be that a variable rate would beat this anyway.
  • AliceBanned
    AliceBanned Posts: 3,048 Forumite
    Name Dropper First Anniversary Combo Breaker First Post
    Options
    Sam911 wrote: »
    Reasonable ?

    That deal sounds terrible to me, just my opinion though.

    I will shop around a bit more, but am not optimistic. I do think the interest rate in this deal is a rip off; and some lenders cash in on the fact that I have poor credit history, but I have to start somewhere!
  • AliceBanned
    AliceBanned Posts: 3,048 Forumite
    Name Dropper First Anniversary Combo Breaker First Post
    Options
    Leon_W wrote: »
    Sam911. It seems perfectly reasonable for someone who has had credit issues to be charged a higher rate. In fact it is roughly the same level as most high street lenders SVR.

    However, industry rumours abound that Lehman Brothers, the US bank that owns Preferred and Southern Pacific, is closing its doors tomorrow to any new lending so the point may be academic !

    Regards

    Thanks - I will keep my ear to the ground on this one.
This discussion has been closed.
★ ★ ★ Meet your Ambassadors

Categories

  • All Categories
  • 8 Election 2024: The MSE Leaders' Debate
  • 343.8K Banking & Borrowing
  • 250.3K Reduce Debt & Boost Income
  • 450K Spending & Discounts
  • 236K Work, Benefits & Business
  • 609.2K Mortgages, Homes & Bills
  • 173.4K Life & Family
  • 248.6K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.9K Discuss & Feedback
  • 15.1K Coronavirus Support Boards