Could your lifestyle affect your mortgage application?

by Clare Butcher (Basildon), Brooke Barnes (Thurrock) and Beryl Nicholsburg (SWF).

If you are planning to apply for a mortgage then you will now face tougher questions about your lifestyle, under new rules which came into force on 26 April.

The changes, brought in by the Financial Conduct Authority (FCA), mean borrowers could now face questions about their regular outgoings – such as childcare costs, loans taken out for other purchases such as cars and even haircuts or beauty treatments – when they are undergoing affordability checks.

Known as the Mortgage Market Review (MMR), the new rules mark the biggest change in the mortgage market for more than a decade and were originally drawn up during the recent financial crisis.

The MMR is designed to stop lenders giving people mortgages that they cannot afford to repay, although there are also concerns that the additional checks could delay the process or even lead to applications being rejected.

By asking mortgage applicants about their household expenses, it is hoped that lenders will be able to verify how much spare money customers have to ensure that they can afford the mortgage.

Lenders also include these additional checks for people wishing to use the Help to Buy scheme, which provides shared equity loans of 20 per cent of the price of a new-build property if the buyer puts down a five per cent deposit from their own savings.

At Palmers, our residential conveyancing team is highly experienced in advising clients on a wide range of matters, including property sales and purchases, remortgages, new-build plot sales and purchases and specialist residential property law issues. We also have particular expertise in the Help to Buy scheme.

It is best to start making mortgage enquiries as soon as you know your intended budget for the purchase and even before you have had an offer accepted on a property. If you already have a mortgage offer but are concerned that you may not be able to complete your purchase before it expires, then you should try to extend the existing offer rather than reapply and risk refusal under the new rules.

We are happy to recommend an independent financial adviser who can assist you with the mortgage process, should you wish us to do so.

To find out how we can help you, please contact us on 01268 240000.