We all want our families to grow up in a secure and happy home. Bricks and mortar are the foundations (sorry for the pun) of this. Careful budgeting is an essential part of any household, whether you are a renter or a home owner. Sadly some homeowners, including even the most careful budgeters, have been caught out by new rules now in place for mortgages.
If you currently own your own home and want to find a new special place or are considering a re-mortgage (thinking about those budgets again!) then it’s worth knowing about these new mortgage rules.
The Mortgage Market Review introduced some new rules that could impact you getting a mortgage in the future. It introduced new checks on affordability; basically tougher tests to check you really can afford your mortgage. If you have an annual income below the national average (around £25,000) then it’s possible that you will struggle to pass the new affordability hurdles.
Sadly, some existing homeowners are becoming stuck on their lenders’ higher standard variable rate once their current mortgage product ends. This is sometimes as a result of failing the new affordability rules and if their lender uses a computer based system they are automatically rejected. These have become known as ‘mortgage prisoners’ and are part of a group of mortgage misfits – individuals and families that are struggling to get a mortgage from national banks and building societies.
However all is not lost. If you’ve held a mortgage since before April 26 2014, always paid your mortgage on time and don’t need to borrow any more, then you can access something called ‘transitional arrangements’. These are designed specifically for mortgage holders who have successfully held a mortgage from before the introduction of the new affordability rules and cannot meet them. Lenders can use ‘transitional arrangements’ to consider your case individually and pragmatically. Some mortgage lenders, such as Ipswich Building Society, will even consider your application if you’ve already been turned down by your existing provider.
If you are a mortgage prisoner or a mortgage misfit here are some useful suggestions to help make your mortgage search successful:
1. First of all check with your lender if you meet the new affordability rules, they should be able to do this without conducting a credit check.
2. Ask your lender if they are using transitional arrangements and the criteria for these.
3. To increase your choice in mortgages search for lenders who will apply transitional rules to all borrowers (not just their own).
4. If you’re an older borrower (sadly that can be anyone over the age of 40!) then ask lenders what their maximum lending age is.
5. Look for a lender that uses something called manual underwriting. This means the lender uses human beings rather than an automated system to make their lending decisions.
So if you’re a mortgage prisoner or a potential mortgage misfit, then don’t panic, there are mortgage lenders who can help you.