Case Study: When the bank says “no” – Overcoming mortgage affordability challenges

by Megan Addy – Director | Independent Mortgage & Protection Adviser @ Prism Mortgage & Protection Advice

First Time Buyers commonly face two main mortgage affordability challenges: saving enough for a deposit while renting and securing an income level that allows them to borrow the necessary amount to purchase their first home. These challenges, along with the complexities of the homebuying process and the varying affordability calculations and criteria from lender to lender, highlight the importance of seeking guidance from an experienced Mortgage Adviser.

In this case study, I’ll show you how I helped a couple achieve their dream of purchasing their first home, despite the obstacles they encountered.

Client Background:

Elliot and Zoe had been renting privately for 5 years while saving hard for a deposit on their first home.  They were tired of “paying their landlord’s mortgage” and were keen to get a place that they and their two dogs could call home.   Elliot had recently received the good news from his employer that they would be promoting him to a more senior position in 3 months’ time, which would increase his annual income by £10,000.  With this good news in mind, and a 5% deposit saved up, Elliot and Zoe felt that the time was right to start house-hunting.

Challenges and Objectives:

Elliot first contacted me after a disappointing and frustrating experience with his bank. He and Zoe were over the moon to have had an offer accepted on their dream home, but the bank had rejected their mortgage application even though their initial Agreement In Principle had been successful. As loyal customers for many years, they assumed their bank would provide the necessary borrowing.

Elliot had included in the Agreement In Principle his future pay rise, as well as Universal Credit that Zoe received due to a health condition. However, to their dismay, the bank’s Mortgage Adviser informed them they could not consider Elliot’s new income until he had been in the position for at least a month, and they would not consider Zoe’s Universal Credit at all, deeming the borrowing they needed as unaffordable.

The Solution:

After fully understanding Elliot and Zoe’s situation, I reassured them that, despite their bank’s decision, different lenders have different criteria. I was confident I could find a lender that would consider both Elliot’s future income and Zoe’s Universal Credit

My knowledge of the mortgage market and varying lender criteria led me to a lender willing to consider both incomes and who offered a more cost-effective rate than their bank, saving them over £20 per month. This approach addressed the affordability issue and ensured a solution tailored to their specific needs.

The Outcome:

The lender I recommended approved Elliot and Zoe’s mortgage application, allowing them to purchase the property they loved, knowing they had secured the most suitable and cost-effective rate. I also discussed protecting themselves and their home with them, leading to their decision to put in place Life Insurance, Income Protection for Elliot, and Buildings & Contents Insurance. Having worked so hard to reach this point, it was crucial for them to protect their property and themselves against life’s uncertainties.

Conclusion:

Elliot and Zoe’s journey from disappointment to homeownership highlights the importance of professional advice in navigating the mortgage market’s complexities.

If you’re a First Time Buyer facing similar mortgage affordability challenges, let’s discuss how I can guide you through the process.

Book your free initial consultation here.