Looks like mortgage won't go through...Plan B?

[Greenfairydust]

I made an offer on a house 2 weeks ago, I had a mortgage in principle for up to £85K with no issues and I have a £200K deposit in the bank from the sale of my previous home (a 1 bed flat).

I am in my early 50s and work part-time & also receive a small PIP award for a long-term disability. House is 275K. My salary is £25K.

Now the broker who did my mortgage in principle and is seeking a £75K mortgage says that the bank might not give me the full amount because my pip award is renewed every 3 year.

I am extremely pissed off by this as I based all my calculations on the mortgage in principle and expected that my salary itself would be enough to borrow that amount (3 times my salary) rather than having to faff about with PIP awards. The broker never mentioned that this could be an issue.

I am having second thoughts about the whole thing now as a result and wonder if I should just withdrew from this purchase and look for cheaper home to buy (easier said than done as I am on the South East coast) or just accept that I might need to move into a 2 bed flat rather than a house.

I am concerned that if the brokers starts looking for a new deal somewhere else I will end up with hard searches on my credit score and still no mortgage...and I don't want to start paying solicitors fees for something doomed to fail.

What would you do in my situation? Am I overstretching myself anyway?

I really wanted a small house after having so many issues with noise in my previous flat...

Oh, just seen your update. Don’t know the area in any detail but the Thornbridge road one looks pretty good to me, loads of potential and liveable in the meantime. It would hugely benefit just from a lick of paint. Have you looked around it, if not I would definitely get a viewing.

I’m not keen on the other one but it’s probably just my personal preference, but as others have said to extend the lease could be costly and also involve a lot of hassle, so you should definitely get specific advice on that if you did want to go for it (it’s definitely possible but you’d need to get an idea of price and procedure with the freeholder).

Do you need two bedrooms, there are some sweet one bedroom houses that look very liveable.

@ComeOnYouSummer

Yes that's one requirement I can't compromise on. I need a 2 bed.

Is there anything dodgy about this one?

@ComeOnYouSummer

Quite a busy road but I will look into it :)

Good luck with it all, you are in a good position.

I had a chat with the mortgage advisor and we agreed to touch base in 2 days once the bank has given them more/final feedback.

Basically it sounds like I could get the mortgage but it would have to be a longer term which I am not comfortable with.

Apparently the short term affects how much they are willing to lend/income multiples so I could get my 3x income but only over 18/2O years which would mean repaying until I am 70 year old (sigh...) or having the pressure to overpay every year.

So I will wait to hear from the broker but I realistically think I will need to look at a cheaper property and a smaller mortgage of maybe 20K.

I feel rather sad about it all and about letting the sellers down but unfortunately it is not something I have control of.

Why wouldn't you just agree to the longer term, then make overpayments to bring it back to the term you'd prefer? Very straightforward to do.

Just accept the longer term and overpay each month, all you need to do is set the direct debit higher than the mortgage minimum. It is then automatic and no pressure.

Usually you can overpay by 10% per year.

@Greenfairydust id be interested to know if you can get a mortgage for £20k I’m looking at moving and would need a mortgage of that amount but unsure if it’s possible. I’ve not spoken to a broker but couldn’t find a high street bank who would offer that amount. If you can would you mind updating, a bit cheeky but I’d be really interested.

I'd overpay. The other house could swallow up quite a bit of money and I would avoid a leasehold flat.

I think if I were you, if you know what the payment would be on your mortgage for 12 years, then just pay that instead of the lower payment they dictate over 18 or 20.

An automatic overpayment. It won’t be more than 10% and then you have it your way. It’s not really “pressure” to overpay, it’s just doing it your way, rather than the bank’s.

@RoseBucket

''I'd be interested to know if you can get a mortgage for £20k I’m looking at moving and would need a mortgage of that amount but unsure if it’s possible.''

Actually I once had a mortgage with Halifax for £25K. It was for a shared-ownership flat and they were happy to lend me that small amount to buy a 35% share. I was much younger though. I can't quite remember what the duration of the mortgage was and I paid that one back early.

I am not sure if Halifax still lends small amounts like this these days but still worth trying :).

@InterestQ

''I think if I were you, if you know what the payment would be on your mortgage for 12 years, then just pay that instead of the lower payment they dictate over 18 or 20.''

That's a good point. I will have another chat with the broker once they have more clarity about the lender is suggesting/agreeing to or not.

Will check whether I am allowed to overpay a bit every month or if that would be an issue.

Try London and Country! Honestly they are amazing!

@user1471538283

Thank you.

Will give them a call if the current mortgage advisor doesn't manage to get something decent out of the current lender.

I think as a PP said, you might want to extend the term to satisfy the affordability criteria (if it becomes a problem).

That doesn't mean paying for longer in reality. You set your monthly amount as it would have been in 12 years and get it done faster. You can overpay by up to 10% of the balance each year.

It's worth getting the broker to play around with it if it gets you what you want.

You know you are frugal but the bank will still have a basic level of what they expect you to spend.

Over paying is a good option as if you have a really bad month with a major expense you aren't committed to the higher amount. And in good months you can throw a bit more at it. It sounds like you are financially disciplined so this wouldn't be an issue.

@Calmdown14

Thank you.

I did email the broker back yesterday after our chat to tell him I would be happy with this scenario: take a longer term but I would be setting my direct debit amount higher so that I could overpay a bit more every month (the mortgage he was suggesting gave the ability to overpay 10% per year).

Fingers crossed this will all work out.

Definitely fingers crossed for you. I think it is the right decision for you. Longer term but overpay.

Agree, longer term and overpay to clear the loan on your preferred schedule seems a good way forward.

How long is your initial deal for? When that period ends you will probably want to remortgage to lock in a new rate, and they may let you shorten the term at that point to something more like what you want. The remaining loan amount will be lower by then in proportion to your income. In principle you can certainly change the term when you remortgage (I've done it, staying with the same provider, to shorten the term after overpaying). So you might not be stuck with a 20 year term for the whole life of the mortgage, even if it starts out that way.

Going back to your house post. There is no way (as a risk and debt adverse person myself) would I ever touch a leasehold. There are too many variables outside your control.

The other house was pretty and spacious (compared to the horrors I have been viewing) and on the surface it was mainly decorating to your taste that was needed except for the kitchen. If you can wield a scraper and a paintbrush then you shouldn't overlook these kind of properties.

Most lenders minimum is 25k these days, but worth chatting to a mortgage broker.

Worst case you could take 25k and then over pay the full 10% in the first 2 years.

@Pixiedust1234

I know leasehold is a nightmare. I had a leasehold flat and endless issues with the freeholders not managing the buildings correctly and high service charges.

Yes the other house is nice but there seems to be some issues with the sellers or the agent because it has been on the market for a while now and when I had expressed an interest in making an offer there was a complication with it being listed with two agents and they never even got back to me. So I ended up offering on something else. But I did ask for an update this week on what was was happening with that house and still no answer...I wonder if they might turn it into a rental or if there is some issue in the background.

@Toooldtoworry thank you that’s really helpful and good to know. Good luck @Greenfairydust Im actually looking at flats myself, I used to live in one before buying houses and actually miss living in a flat but know the red flags to look for.