New BTL affordability rules

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  • slooky
    started a topic New BTL affordability rules

    New BTL affordability rules

    I have fallen foul of the new affordability rules.
    My interest only BTL mortgages were coming to the end of their term. (For some reason the mortgage term was set at my husbands retirement age of 65). The mortgages are in my name only. I am with Birmingham Midshires but I knew that they usually extend the term of the mortgage so I didn't think it would be a huge problem to extend as I am 52.
    However, it was a problem and the people I spoke to at Birmingham Midshires were actually quite nasty.
    I will make the story as short as possible. First they refused to extend the term but they would give me 1 year to sell the property. They said I had broken the terms of the contract because I did not have the funds ready in the bank to pay of the mortgages.
    They then said they would extend the term if I made the mortgage a repayment (which I did not want to do). I had to fill out an affordability form.
    They concluded I could not afford the mortgage. Therefore they could not give me a repayment mortgage (good!).
    The third person I spoke to then agreed to extend on the same terms but for only 5 years, which I know is going to pass very quickly.
    My question is this: I thought the FCA said that the affordability rules should not be applied to people who wanted to remortgage. Does anyone know anything about this?

    My other question is about how the affordability rules work. When I took out the mortgages I was not working and did not have another income. (BM criteria at the time did not require a salary from another source.) However I do remember we had to give bank statements from all our accounts so they obviously looked at my husbands income.

    When I filled out the affordability paperwork I was told I could not include any of his income. But I had to include 100% of all the household expenses, and 100% of expenses for my 2 children. They said, I had to imagine a scenario that my husband had either died or left me! This is why I failed the affordability test.
    Were they correct to do this. They looked at my husbands income when I took out the mortgages (and the term end was at his retirement age of 65) but they say I can not include it now.

    I have posed this question on the RLA site with the legal team but did not get an answer.
    I have 5 properties but only 2 are mortgaged.
    The mortgages exceed the stress tests.


  • PJackson
    replied
    The figure is estimated so is only approximate. Anyway 93 is closer to 97 than it is to 100, so what I wrote would still be correct if 93% is the correct proportion.

    It is certainly true that some humans have not (yet) died so the death rate is less than 100%.
    It is also true that that there is no good evidence for a human living to the age of 123. It is a reasonable extrapolation that all humans will die, but it is also probable that at some time someone will reach their 123rd birthday.
    It might also happen that a way to extend life indefinitely will be invented.

    My main point is that there is a lot of misuse of statistics going on, especially related to housing. One needs to be very careful to check exactly what is being referred to, especially in secondary sources where the qualifications that appeared in the original might be missing. I am thinking of a recent report by Shelter that was technically accurate, but everywhere that it was reported a greatly exaggerated imprression was given by apply the main conclusion more widely than the report justified.

    Leave a comment:


  • jpkeates
    replied
    Originally posted by PJackson View Post
    Actually a significant number of humans have not died. The overall death rate may be closer to 97%.
    The incidence is 97%.
    The rate is 100%.

    But I admire your optimism!

    Leave a comment:


  • leaseholder64
    replied
    More like 93%, if you use the figures in https://www.prb.org/howmanypeoplehaveeverlivedonearth/

    But that id only the proportion who have died, rather than the proportion that had or have a finite lifespan.

    Leave a comment:


  • PJackson
    replied
    Originally posted by jpkeates View Post
    Without being too harsh, your husband will definitely die - the death rate for humans is 100%.
    Actually a significant number of humans have not died. The overall death rate may be closer to 97%.

    Leave a comment:


  • slooky
    replied
    HI Boletus - It appears I'm not up to date with BM criteria. They must have changed them again. I know when I took out the mortgages they didn't require a separate income and then they changed it to a minimum salary of £25k. When they extended the loans last year in October the criteria said no other income required which is why I didn't think I would have a problem. They have obviously changed it again since.

    If my properties were not in the same building I would consider selling one. But my flats are all in one building hence the freehold / leasehold work done. We find this very convenient for many reasons and I can also control who lives in the building. If I sold one to pay of the other 2 mortgages I would lose control and also have to deal with a management company. We know that is an option if we were desperate. But we would have to be very desperate.

    jpkeates - thanks for stats on death rate!

    Leave a comment:


  • jpkeates
    replied
    Originally posted by slooky View Post
    So is it reasonable to assume that my husband will leave me or die. I thought this was harsh considering they looked at our family income when I took out the mortgages and for some reason the mortgage end date was set to my husbands 65th birthday. I find that very strange.
    Without being too harsh, your husband will definitely die - the death rate for humans is 100%.
    And (as a married man in his 50s) the stats aren't great. Men die earlier than women.

    One of the problem with affordability now is that rent is usually treated differently to other income - some lenders ignore it altogether.
    Which is odd, because it seems more reliable to me than wages.

    It might be worth looking at the portfolio as a whole and funding that, or (as above) sell something to pay down the borrowing.

    Leave a comment:


  • Gordon999
    replied
    slooky,

    I suggest you sell one of your mortgaged properties and try to pay off the other mortgage loan so as to have 4 mortgage free properties.

    Then no more hassle.

    Leave a comment:


  • boletus
    replied
    You sound like a safe bet to me.
    IMO BM have gone daft with their "computer says No" policy instead of using common sense.

    Originally posted by slooky View Post
    Luckily you don't have to have a separate income with BM. They are one of the lenders who do not require it.
    They do for new lending;
    For all applications, at least one of the applicants needs to be in receipt of earned income and/or pension income
    Perhaps you didn't need it as you're an existing customer.

    Leave a comment:


  • slooky
    replied
    Hi Boletus
    Thanks for your points.

    Luckily you don't have to have a separate income with BM. They are one of the lenders who do not require it. Otherwise they could have said No straight away. I simply failed the affordability test because I had to include all our expenditure (for the whole family husband included) but was not allowed to include his income.

    When I took out the BM mortgages we didn't have a joint personal mortgage (I don't know what PPR stands for). I had a house in my name with the mortgage in my name. I also took out 4 BLT mortgages at the time and this was when they wanted copies of my husbands bank statements. I have since paid of 2 mortgages and am left with 2. You would think they would see me as a safe bet. The 2 existing mortgages have a LRV of about 42%. I really am not a risk.

    The BLT properties were in joint names when we bought them and we were advised that the only way we could get competitive mortgages was to have the flats in my name (leasehold) and for my husband to own the freehold. We also had to set up a management company. And as I said before it cost us a pretty penny.

    Leave a comment:


  • boletus
    replied
    Originally posted by slooky View Post
    You say it is reasonable to assume the above but in that case any "what if" principle should be applied.
    Why "should" it? It is up to individual lenders to decide what level of risk they choose to lend to.
    BM have decided that borrowers without any earned income* or pension income are a higher risk for them.

    I am absolutely positive that the FSA or the FCA said that the affordability rules shouldn't be applied
    It doesn't say that, lenders don't have to further lend to existing borrowers.
    It only says the PRA expectations do not apply to existing borrowers (their words).
    There is no "should" about it, only "if they want to".

    Why did BM ask for copies of my husbands bank statements from his personal account and his business account as well as mine when I took out the mortgages?
    Perhaps because your PPR was held in joint names? If they've got a secure earner paying off a mortgage on a property with a big chunk of equity, it is a pretty safe bet. Or maybe you were a borderline case even in the Wild West days and a decently paid husband supporting you was enough to tip the balance.

    A couple of further points that might be a bit more helpful;
    Speak to an independent mortgage broker, TMW for instance do not require an earned income or pension.
    Also take some proper advice about putting the properties into joint names, it is quite easy to do.


    *Earned income is the term BM use to distinguish between rental income but any self managing landlord knows rental income can be damned hard earned.
    Last edited by boletus; 16-09-2018, 10:05 AM. Reason: spelling

    Leave a comment:


  • slooky
    replied
    Sorry I was being flippant I don't expect to make a claim.
    I did not know that it didn't apply to BLT mortgages that's a disappointment.
    Why did BM ask for copies of my husbands bank statements from his personal account and his business account as well as mine when I took out the mortgages?

    Leave a comment:


  • loanarranger
    replied
    Do not confuse the FCA guidelines on a Regulated Home loan and a Non Regulated Buy to Let, the guidelines for the latter are not covered and any claims against the lender would be futile. You exercised a “commercial” transaction.

    Leave a comment:


  • slooky
    replied
    Propertygoesup- Sorry to hear that. I am absolutely positive that the FSA or the FCA said that the affordability rules shouldn't be applied to existing customers who quite clearly have had no problems paying their mortgages but at some time or other in the future would need to remortgage. They said that even if other lenders refused to lend, the existing lender should if the customer had no financial problems.
    If these mortgage companys were so wrong back in the "wild west days" I look forward to some kind of compensation in the future for letting me have a mortgage while I was too stupid to realise what I was doing!!
    Shame I was too intelligent at another point in my life and cancelled the PPI they tried to get me to pay.
    By the way, BM does take into account my other rental income so that was a positive. I know when we were looking to mortgage our home a lot of lenders would not include rental income. It absolutely made no sense to me as my rental income comes from 5 different sources so it's highly unlikely that all 5 of them would cease.

    Leave a comment:


  • Propertygoesup
    replied
    The new rules are extremely strict. I am having to sell my flat and now have the problem of an ignorant tenant due to these rules. They are basing calculations on me having to pay the mortgage with no consideration of rental income.

    Leave a comment:

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