This is a slightly different success story to our normal applications. Usually they are down to bad credit, this one however had no bad credit was still a very good success story due to affordability.
One of our existing customers got in touch to see if we could help. Due to divorce they wanted to move and buy a new home. They did not want to downsize too much or move too far out of the area due to schools. But with one income that made things a little tricky.
It meant we needed to find a lender who would lend as much as possible. In all honesty, I thought what the customer wanted was probably going to be a little out of reach.
What we did
We have a tool which allows us to put the customers income and commitments which then gives us approximate figures of how much Mortgage lenders would lend. We tend to use this with a pinch of salt as it is only really a guide. This however allowed us to filter out a lot of lenders. We were then left with a handful of options that would (according to the tool) lend in and around the amounts needed on the face of it.
We found that the ones coming back with the highest amounts were the ones who would assess affordability manually. By that we mean, they will go through bank statements line by line rather than using ONS (standardised) figures.
When we were putting in the figures from the customers bank statements a lot of lenders were actually reducing the loan amounts and were not actually giving any higher figures.
Speaking to lenders
This is something customers struggle to do, but as brokers we have access to our account managers. We narrowed it down to 3 lenders and then spoke to them to see if there were any other ways to increase the mortgage amounts as they were still enough.
One lender had a suggestion, they allowed us to do around 30% of the mortgage on Interest Only. That allowed us to get an extra £15,000 according to their affordability calculator.
The application
The customer was comfortable she could afford the full amount on repayment. Although part of the mortgage was on interest only, her intention was to just pay the mortgage as though it were a repayment mortgage and in essence overpay.
The lender however would not allow this “overpayment” as a way of clearing the interest only mortgage. We had to get a little more paperwork together in order to provide evidence of how the interest only element could or would be cleared by the end of the mortgage.
Outcome
Success! The customer completed in early August. We were able to get the applicant around £70,000 more than what the high street would offer her! That is the difference between a mortgage of £270,000 and £340,000 approximately!
The interest rate was around 3.1% which was around 0.8% higher than the rest of the market at the time, which meant repayments were around 10% higher than if it had gone on the high street. But obviously the high street would not lend anywhere near enough.
This is one of those applications where we put a lot of work in, it was not our normal type of application. But with a bit of work, the customer being prepared to be a little flexible and understanding it will result in a higher rate that everything came together and worked out well.
As it happens, by the time the customer completed the rate actually looks good when we look at what has happened to interest rates since the application went in.