To ask why we were declined a mortgage agreement in principle

[ChickenChickenHen]

Slightly perplexed. We just applied for a mortgage agreement in principle with our bank. We need a loan of just under 3.5 times my partner's salary (I'm a SAHM). We thought this was fairly conservative. Just discovered that the most they can offer is only 2.25 times his salary! We checked with another bank and they offered slightly more but still only 3 times salary, so not enough.

We have a huge deposit (63% of property price), no debts, excellent credit scores (just soft checked), very secure income. We do have two kids but outgoings fairly low.

Now obviously I know about the disaster budget and the cost of living etc, but my understanding was that 4-4.5 times salary was still typical. Is that wrong? Is it just for people without dependents?

We asked the bank for an explanation but they just gave us a rote statement about affordability that didn't explain anything. Maybe this is normal and we will just have to wait for prices to fall, but any insights would be gratefully received

Definitely a broker. I work for one. Genuinely don't know why you wouldn't - we don't even charge a fee, same as many others.

They told you why you were declined - affordability. That means, when they deduct your living costs from your income, their calculation shows that you wouldn't have enough left to make the mortgage payment - maybe now, or maybe in the event that interest rates went up again.

The more you can squeeze your outgoings for a few months, to prove that your income is enough to live on, the better.

https://www.moneysavingexpert.com/mortgages/best-mortgages-cashback/

We had same issue offered AIP for just over half of that we were offered in 2020. Despite both my wage and our deposit having increased significantly.
same sit with one sahp and 2 kids.

Thank you so much for the input everyone. This is all incredibly helpful

Don’t just go to a bank - you need an independent mortgage broker who covers the whole of the market. So many various options are available if you’re in the UK. John charcoal is one. Good luck

Recently completed on a house so went through the process.

Am single, no dependents. Between Jan and August last year I spoke to brokers who ALL said I could get 4.5x no issues and I got several AIPs (all the pesky estate agents make you speak with them - AIPs kept expiring as my house hunt was not very successful). I have zero hire purchase / debts / extremely low outgoings, perfect credit score, years of paying rent at double what I expected the mortgage to be, and was pretty confident about the whole thing. When Truss did her thing I put the house buying thing on hold for a few months, then finally found somewhere in February this year.

When I came to apply, I could only get just over 4x, and over 30 years, with a choice of only two lenders who would lend that. Thank god I had the reserves to make the purchase work. I'm 39 and had been saving for this for about 15 years so was absolutely floored by having so few options.

The thing that makes me cross is once I'd got the offer, the rates steady improved so I got shifted into a slightly better rate twice. So my monthly payments went down, but they wouldn't have increased what I could borrow and keep the payments the same?! And they added on the £1k fee to the mortgage almost by default - but they wouldn't they have lent to me that figure in the first place. It's a total nonsense the whole thing!!

Use a broker. It's not just the multiple, the the amount left after costs paid, the higher your income despite a higher loan you have more left over but a broker can sort this. We had issues on age and spousal maintenance grounds despite only wanting 2.5x L&C found us a mortgage within a couple of hours

I agree try a broker and also try banks like Handlesbanken directly. They have more scope to make a personalised offer.

Thing is, if the OP and her dh have a 63% deposit to put down, then there is minimal risk to any lender.
I get the thinking that 1 salary and so many dependents is a higher risk, but surely they have to take account the massive deposit.
Like others, I suggest going to an independent mortgage broker.

Use a broker. I note you say partner. If unmarried don’t be tempted to buy only in his name to get around issues as you are in a mess if you split.

Interesting - DH got 5 x income last year with 50% deposit and 4 dependents (I have a token income but we didn't include it in the income figures as it is so variable). Also only over 24 years due to age. We did go via a broker though (and both the brokers we spoke to would have got us the same mortgage which actually turned out to be with our own bank).

I'm hoping we don't have issues when we come to remortgage in 4.5 years!

We use a private broker who lives locally now but we always used to use London & Country and found them to be really good. Their commission is usually paid by the mortgage lender rather than the borrower so no extra cost. Let them do all the leg work!

For those of you who went via a broker, did you have to pay much higher rates on the mortgage? I've been basing my own affordability calculations on the assumption that we'd be offered a relatively low rate (by today's standards) due to high equity, good credit rating etc. But obviously that's in question now too.

I imagine if largely do do with interest rates. 4 years ago 3.5 and even 4.5 was normal for one income. You are stressed tested for interest rates rising but stress testing when rates were 1% is a lot different to now when they are 4.5%.

Definitely go through a broker. We got 3x my Husbands salary and I’m a SAHM.

A broker will literally search through every available mortgage on the market to you and tell you all the rates / deals / costs etc. Then you can chose which one to use. It will be the same rates that are available.to you if you go direct but they'll do all the searches and comparisons for you and then liaise with the mortgage company.

OP can you post the gist of the statement the bank provided you with that you say “didn’t explain anything”? Obviously don’t post anything identifying, but it would be useful to post what the bank have actually said so that posters who work in financial services can give you some advice tailored to your situation.

As others have said, speak to a broker. The broker is acting for you and should be able to a) give advice on what you can get; and b) steer you towards the lenders that are more likely to make a good offer in your specific circumstances. We used London and Country and were pleased with the service (no other connection)

Our broker got us far lower than the open market offered.

My broker got me exactly the same rate I could have got without him, but I guess he did find it and there were a lot of people who wouldn't lend to me.

It's just over 4.09% by the way, if that helps give you an idea what's around at the moment (I had big deposit - my LTV was 35% but mortgages go in bands only down to 60%)

We had trouble remortgaging (via high street banks) when I wasn't working even though DH was earning our previous combined salary. I agree with others that it's likely the risk of one earner and therefore having the other adult as an additional dependent. Now I'm working too, we've not had any issues.

We used a mortgage broker for both our house moves and we found them very helpful. For the second house move, we used Which?

its because you’re a dependent. Mortgages are massively impacted by that.

we got better rates via a broker. We had 500k equity, DH salary of £250k (we didn’t include my salary as pregnant with second child so not reliable income), and were offered a mortgage of £900k. In the end we didn’t take the financial risk and we stay put- very pleased we did as I’ve since given up work to look after the children and we’d have been very stretched.

The mortgage market is so different now to how it was last year.

I think the affordability checks have got so much stricter. We also found that a number of lenders didn’t look at our actual outgoings but compared us to a typical 3 person household (there are 3 of us) which all felt a bit silly.

In September last year we could have borrowed £350k over a 25 year term, by February this year the best offer we could get was 250k over 40 years. We had a 40%LTV ratio.

I think it’s just tricky right now and lenders are being extra cautious.

Ah.

When I applied for my mortgage, I worked out my outgoings and stress-tested everything for a massive % rise in cost of living and a hike in interest rates. It sounds like if you uplift the numbers in your spreadsheet, it's no longer affordable?

If you tweak the numbers in your sheet, is it still all doable?