There are new rules when applying for a mortgage/remortgage. Explained here.

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We are very fortunate to have finally finished the extension work on our house. So I have taken the opportunity to get the house valued and with the new value we will have a much higher proportion of equity value. Which should equal a better mortgage rate.

So the good news is that our house has been valued at £110k more than it was worth 6 months ago. Considerably more than we spent on the extension so we are really happy. My hubby did a great job in project managing the extension and we’ve ended up with a great living space. But our immediate thoughts were blimey maybe we can sell it and maybe reinvest in another house with a bigger garden (for the 3 boys and football!) and maybe get a bit bigger a house for a bit more money. Surely the bank will lend us more considering the equity we have built up??

I bank with First Direct and our existing mortgage is with them too. I called them last night to find out how much additional borrowing we could apply for..to help make the moving house decision easier.

Then the 100’s of questions started and 1 hour on the phone just for a pre-application! So changes to mortgage applications came in a few weeks ago and because its early days the mortgage companies are being ultra cautious. I had to declare every single regular expense before they will consider affordability to repay a mortgage.

So I had to declare..

1) Firstly basic income only, they will not take account of any bonuses.
2) Existing credit card debt for hubby and me, despite it being on 0% deal
3) Childcare costs, a biggy for me at around £1000 per month
4) All utilities, gas, electricity, water, phone, broadband, council tax, mobile phones
5) All insurances, life, health, car and home insurance
6) Gym membership, contact lenses
7) Oh and how can I forget food shopping.

So after all of this I’m told we can only actually borrow an additional 40k on top of what we already owe.

Decision made we are staying put:-) And maybe now we knock down the garage/ or turn it into a play type room.

I also asked what the impact on our additional borrowing would be if we didn’t have £1000 per month childcare to pay. Apparently we would be able to borrow an additional £140k rather than £40k. One day my childcare bills will reduce, but with the youngest being 18 months, not quite yet.

So we are staying put in our newly extended and sparkly new house and I will re-mortgage, but maybe not with First Direct. They are so busy that they can’t offer me a consultation appointment to discuss rates with me until 3rd June. Bad service First Direct. I shall be making a complaint about that.

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Lynn Beattie

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4 Responses

  1. I was shocked at the depth of the questions. Gone are the days of 3-4 times your salary. An estate agent friend was telling me, they’re following rules closely at moment but should start to relax them a bit soon.

  2. Perhaps as a debt advisor I see too many people who have over-extended themselves, but I for one am happy at the new more detailed rules and I hope they won’t be relaxed. As the Bank of England is planning to stress test banks on how they will manage if there is a 35% house price fall and a 4% rise in mortgage rates (see http://www.mortgagestrategy.co.uk/news-and-features/sectors/regulation/regulation-news/boe-plans-stress-tests-for-lenders/2009760.article) , I would be surprised if the rules are relaxed too much.

    It seems quite right to me that if you are paying £1,000 a month childcare, you should be able to get a much larger mortgage when that ends. It’s just we have got used to an unreal world where we were not asked these sorts of questions.

    1. I see your point…and if im really honest with that huge childcare bill we probably cant afford more of a mortgage. I am trying to reduce the term at the moment so we pay off more capital than interest. Down to 17 years..I would so love to be mortgage free.

  3. True affordability had to be brought in. The property market needs to cool down. Prices as a multiple of peoples incomes are simply to high.

    Finally we see changes to the buy to let market, which should deter the rise in this sector.

    Interest rates have been at a record low, so people need to remember that they can and will go up at some point.

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