This success story is a little different to most of our others. The others are generally around complications to do with credit problems, however in this example it is purely to do with affordability.
We started speaking to the customer in 2020, it became apparent quite quickly that they were trying to really push affordability beyond what was possible with the vast majority of lenders. They wanted to push as much as possible as this was going to be their home for the long term until the kids grow up and move out at least. The interesting thing was that they could afford the monthly repayments as they had been paying rent for 12 months which was more than the mortgage was going to be. However that is not really something lenders consider when looking at how much they are prepared to offer.
Due to the customers age we had to limit the term of the mortgage. Added to that, only one of the applicants worked there were a couple of kids and a loan with not insignificant monthly repayments. All the major things which can affect affordability were there to contend with and with only one income, it was quite tricky.
What we did
We tried a few lenders affordability calculators to get an idea of what we could get. Unfortunately we were about £50-60,000 shy of what they were looking for. We also have access to a system which checks multiple lenders calculators in one go (although this is not the most accurate) and that system was bringing back the same sorts of figures.
We then looked at smaller lenders who can assess affordability manually. The benefit here can be if your monthly expenditure is below that of the national average for the same size family, we can look to maximise your lending ability… that did not help either and if anything they were actually worse!
We then had to look at lenders who we would ordinarily use for the customers with bad credit. These lenders are now known as “specialist lenders” rather than adverse or sub prime lenders. The reason for that is because they look at many types of customers who can not be placed on the high street. Ironically they will lend more despite the higher interest rate.
We were close to giving up to be honest. However eventually we were able to find a lender who would lend £6k less than what the applicants were looking for. That was obviously still a pretty large gap to bridge, but it was £45,000 closer to what was needed than we could originally find and the software we subscribe to could find.
The customers were able to bridge the gap due to a couple of bonuses in pay that had recently been received and with a little help from the bank of mum and dad meaning we could eventually get the application in and the customers could go for the new family home. They also had to make some sacrifices – higher interest rates and to fix in to those rates for a little longer than they would have liked.
However if we look at the positives, they have a mortgage offer for an amount that works for them. They know that their repayments are fixed for the next 5 years and by the time they come to remortgage affordability should hopefully be a lot easier for them to pass as their children will be older, the second applicant may be working and the loan will be paid off.
This was a little out of the norm for us but persistence saved the day.