At least that’s what it sounds like! New rules are coming into effect from 26 APRIL which could just mean the buying process becomes longer and more people are rejected for loans.
Lenders must now not only check the would-be borrower can afford the loan at the current rate , but also ‘stress test’ that they can afford payments should they rise to about 7% in the next five years.
So, not only is child care and travel costs going to be routinely taken into account, but also how much you spend on utilities, pension contributions, student loans, vets bills, clothes, recreation etc; some Lenders will even want to know what you routinely spend on Christmas and birthdays! They will also want to know about impending changes such as redundancy and retirement.
Research by the intermediary Mortgage Lenders Association suggests 57% of Lenders believe more people will be turned down for a mortgage.
If you took out an interest-only loan before the credit crunch, you are more likely to fall foul of the new affordability checks. Equally, if you have a mortgage agreed in principle, you could find you are rejected once the rules come into force.
Nationwide has said that borrowers with an existing decision in principle will have their application reassessed if they do not complete a full mortgage application before it implements the rules on 14 April - so if this applies to you get cracking!
Anything else I should know?
Yes, from 26 APRIL, most people looking for a mortgage , will have to go through a qualified adviser.
And yes, with both Lenders and Borrowers getting used to a new process, there will inevitably be hiccups along the way. The best advice is, like any good Brownie will know - BE PREPARED!
Your first step could be to talk to DOMVS; our financial advisers are poised to help you navigate the latest journey into buying your new home! Call Polly Greenway 01305 757300 in the first instance.
DOMVS: 8th Apr 2014 11:07:00