April 2014
While driving down my road I can see that properties which were SOLD STC are now back on the market.
Early indication is that lenders such as Santander and Nationwide who put rules into place a few weeks ago have turned down mortgages applications due to new affordability rules, stress testing and more rigorous criteria.
Here is a guide on what to expect.
There would be a short interview to agree "intention to lend". Then be prepared to be scrutinized in a few more interviews totalling anything up to 5-6 hours over a number of weeks.
Some of the questions may surprise you.
Access to capital
- How much do you have in existing accessible savings and what is their purpose?
- What is your emergency fund?
- Will you be retaining any equity from this transaction, and if so how will it be used?
- Are you expecting to receive any lump sums of money in the future?
- Do you expect to make lump sum capital repayments in future that should be taken into account when discussing your requirements?
- How much of your capital will you be using as deposit?
Selected retirement age
- What age do you intend to retire at?
- What is the reason for your preferred selected retirement age?
- Do you expect to remain in your current occupation until you stop working?
- Does it seem plausible that the customer will be able to continue to work until their preferred retirement age?
- Will the term of borrowing extend into retirement?
Budget planner and confirmation of affordability
Expect to be quizzed about what you spend on: food, drink, clothing, household goods / services, rent, insurances, mortgage payments, payment protection, fuel, council tax, council tax, TV license, telephone, digital TV packages, transport, entertainment and recreation, holidays, childcare, education, maintenance payments for dependants, pets, medical insurance, luxury items, hobbies, gifts, store cards, loans, second property (including buy-to-let)
After scrabbling around to collect and supply this, they may still ignore it and apply their own guideline figure of around £1800.00 in monthly costs for a family with three children!
Most lenders apply a long term affordability figure, which includes a buffer for potential increases in interest rates (and where applicable an element of capital repayment for interest only mortgages.)
Expect a long delay between each stage and be prepared for "computer says no!" scenario.
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