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The Personal Finance Awards are being held next month and I am excited to announce that I have been chosen as a finalist for the Mortgage & Protection Advice Specialist of the Year Award.

It has been a busy journey from entry to finalist. For Stage 1 I was required to write a personal statement describing myself, my expertise, qualifications and continued professional development.

Following on from this preliminary stage I was then invited to answer a 5 question case study. The case study for Stage 2 was actually quite complex and enjoyable to answer. Giving me the opportunity to showcase all I had learnt from studying for the Advanced Mortgage Advice qualification which I achieved in May this year.

 Mortgage Capacity Expert Changes her Name.....

  It is with great pleasure to announcement that our Mortgage Capacity Expert has recently married and has changed her name from Natasha Phillips to Natasha Palmer. I am sure you will join us in wishing her all the best for the future.

Natasha will continue to offer the same great service and any new Mortgage Capacity Assessment enquiries can be sent directly to her at: This email address is being protected from spambots. You need JavaScript enabled to view it. or feel free to call the office on: 0845 0179 578.

 

In recent weeks I have noticed a significant increase in the number of enquiries for Mortgage Capacity Assessments by individuals who are in no position to obtain mortgage lending. Whilst many of these individuals were already aware of their situation and were simply carrying out an exercise to pacify Court proceedings, it did come as a surprise for some.

There are many tell-tale signs of having the kind of financial circumstances which may not allow you to borrow from a mortgage lender and I will highlight some examples of these below:

Bankruptcy – Many lenders will not consider an application for mortgage lending from an individual who has ever been declared bankrupt and it may not matter how much time has passed since the bankruptcy. Many lenders are happy to consider an application once the individual has been discharged from bankruptcy for more than 6 years but even then obtaining lending may not be a straight forward process.

When calculating mortgage capacity for potential mortgage borrowers, those with low deposits (usually 5%) have, in the past, had very few options where mortgages were concerned. Following the financial crisis in 2008 few mortgage lenders would consider such high Loan to Value mortgages (95% loan with a 5% deposit) and for those who would consider this type of lending and in order to compensate for the increased risk to the lender, higher Interest Rates were charged.

In order to increase mortgage providers appetite for such lending the Government launched the Help to Buy Mortgage Guarantee Scheme on 1st January 2014.  The Help to Buy Mortgage Guarantee Scheme works in exactly the same way as any other mortgage except lenders are able to purchase a guarantee from the Government to support high Loan to Value lending. The Government charges the lenders a fee for this guarantee. The scheme was designed to increase the lenders appetite for such lending and we have seen an increase in the number of mortgage applications being agreed based on low deposits/high Loan to Values. However, this scheme is only available for a few more months as it is due to end on 31st December 2016.

Mortgage Capacity Assessments can be used to explore a range of financial scenarios and provide an accurate, realistic and educated outlook of future mortgage capacity. There are many different ways in which changes to financial circumstances can affect an individual’s ability to obtain a mortgage. The following scenario considers the effect the location of employment may have on mortgage borrowing:

In this scenario my client wanted to explore how the following changes to their circumstances may affect their future borrowing capacity:

  1. Buying a property close to their family and commuting to their place of work, 100 miles each week. In this case the client would require rental accommodation during the working week.                                            
  2. Buying a property close to family and seeking new employment closer to home which would result in a substantial reduction in salary.

I was surprised to learn that mortgage lenders were highly concerned with the clients outgoings based on the commute scenario and mortgage capacity was actually higher should the client seek new employment and suffer reduced pay, despite a significant drop in income of approximately £20,000.00 per annum. The costs related to the commute scenario, which included travel expenses, rent, utilities and food were approximately £1,000.00 per month. Compare this to a reduction in income of £1,666.00 per month gross (based on a £20,000.00 reduction in pay) and it could be argued that the client may actually be better off commuting and taking the higher paid job. However, from a mortgage lenders perspective the commute scenario resulted in higher outgoings and higher outgoings present a greater chance for the applicant falling into financial difficulty.

There is a lot more to consider then just income when calculating mortgage borrowing and research is important. Haven’t got time to do your own research? Are you divorcing and require details of your mortgage capacity? Then please contact us for further guidance.

The world of Mortgage Capacity Assessments is always changing and this month is no exception – Changes to Stamp Duty Land Tax came into affect on 1st April 2016 which will effect those purchasing Buy to Let properties and second homes. The new rates of SDLT for these purchases are as follows:

Purchase price of property  – Buy to Let/ Additional Home Rate

Many of us, not all of course, have enjoyed a comfortable lifestyle over the last 5 years. For those with high Fixed Rate mortgages ending in this period will have switched to a low variable rate and benefitted from significantly lower mortgage payments. Purchases on Credit Cards will have been done so at relatively low rates and for many of us life after the recession has recovered nicely. However, with Interest Rates likely to rise in the near future what can be expected particularly for those going through divorce?

Increased Mortgage Payments: The most obvious change will be increased mortgage Interest Rates and therefore higher mortgage payments. Unfortunately, this means that households will have less disposable income each month. More importantly from a lending perspective the amount individuals are able to borrow may reduce and we could also see mortgage lenders tightening up their lending criteria especially where affordability is concerned. With a reduction in affordable borrowing, individuals going through divorce may need to lower their expectations where prospective properties are concerned, potentially compromising price, size and/or area. For those who already have a mortgage and are currently on a Fixed Rate any increase on the Bank of England Base Rate will not affect them. However, Fixed Rate deals do not last forever and when the current deal ends preparation should be made for an inevitable rise in mortgage costs. For those on Variable Rate mortgage deals an immediate increase in payments will occur.

If you are going through Divorce and questions affecting your future housing and mortgage needs are being discussed it is likely your legal representative will ask you to find out your mortgage capacity. It might be easy for you to have a quick search on-line or have a chat with your existing lender; however, it is vital you get accurate information. Without it you could find yourself in difficulty post divorce:

High State Benefits & Maintenance – Upon separation many people find that they are entitled to claim benefits such as Working and/or Family Tax Credits. Although this income is often a welcome requirement it can lead to problems when applying for a mortgage. Providers are not keen on lending to those who rely heavily on State Benefits or Maintenance income. They prefer to base lending decisions on earned income and if 50% or more of your income derives from other sources your mortgage application is likely to be declined.

A friend of mine who is currently going through a divorce recently came to me with a problem – She had done everything right during her divorce so far; she had sought advice from a reputable Family Solicitor and agreed that the most amicable course of action would be to go through the process of mediation. Access and maintenance payments for the children were dealt with quickly and her husband agreed that, assuming she could take over their mortgage by herself, she could keep the house in return for him retaining his pension and savings. With negotiations proceeding so smoothly all appeared to have gone in her favour…..or so she thought.

As we all know once a divorce settlement has been finalised it cannot be re-written, therefore, getting it right is imperative. Emphasis should be made on ensuring you have the correct information from the outset to allow you to make the right decisions, save time and money.

I  was contacted recently by a couple currently going through Mediation in an attempt to amicably finalise the financial details of their divorce. They were, however, unable to agree on the amount of Spousal Maintenance payable by the ex-husband (Mr P) to the ex-wife (Mrs P) and the disagreement threatened to derail the whole mediation process. They needed to know how these payments would affect their mortgage capacity which they hoped would then resolve this final issue.