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How To Remortgage And Meet Stricter Lending Criteria

Posted in: Latest News
The end of April saw the formal introduction of a new system designed to ensure that lenders conduct a full affordability check on mortgage applicants.

This has practical implications for the amount people can borrow and the length of time that an application might take. For example, most lenders are capping lending at four times applicants’ joint income.

The aim is to prevent any return of the pre-crisis mortgage lending that many described as "reckless" where the market was booming but when property prices fell many had overextended themselves and were struggling to make payments.

Following the introduction of the new, stricter rules, some people who were previously eligible for borrowing, could now discover that lenders are only prepared to offer a smaller amount, or may reject their application completely.

This not only affects first-time buyers, but also those looking to remortgage and next time buyers.
One reason for this is that a lender has to "stress test" a customer's ability to repay if interest rates were to rise.

The Bank rate is at a record low at the moment, so mortgage rates have also been low for some time.
A lender, who might be offering a mortgage with an interest rate of less than 4% now, will have to decide whether an applicant would be able to make regular repayments if the rate rose to something like 7%.

In order to decide, the lender not only takes into account the applicant’s income, but other types of outgoings from money spent on hairdressing, holidays and child care to gym membership.

Before a house purchase can be funded it is important to have a household budget clearly worked out before starting the application process. As an independent broker with years of experience, I have worked with numerous lenders and am accustomed to working alongside homeowners and potential homeowners to find the most appropriate product for their circumstances and also plan ahead to get everything together at the time of application.

Lenders are likely to ask for a number of documents that prove income and outgoings figures, such as payslips running over a three to six month period and bank statements going back over several months. In the case of people with a further property out on rental, they will also expect to see the tenancy agreement.

This is element is no different to the previous application process but is likely to be evaluated from a different perspective and findings will be more strictly imposed.

If you are unsure whether your circumstances will meet lenders’ criteria or wish to find out more information on your suitability or the type of mortgages available for your individual circumstances, contact Bethan Davies on 077 804 42613 or 0845 900 3404 (do you think it is better to have the landline number?)

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