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Questions over First Active affordability calculations
24 March 2007
A broker has called for First Active to change its affordability calculations following a case involving a car loan
A broker, who wished to remain anonymous, said: “First Active has got a good service, and I do quite a bit of business with it, but this offer did not make sense.
“My client wanted to remortgage, borrowing £177,000, which was rejected because the client did not earn enough money and had an outstanding car loan of £6,000. However, the loan was agreed when the £6,000 was added to the loan. I don’t understand how it can reject a £177,000 as the borrower is borrowing too much, but add the outstanding car loan and it is accepted, on £183,000.”
He added: “The car loan was only going to exist for another 12 months, so the client obviously did not want to be paying off the car loan and its interest on a 25-year mortgage deal. I got the client the deal and then immediately put the £6,000 back, as an overpayment, which the offer allowed.”
An RBS Intermediary Mortgages spokesperson commented: “This is purely an issue of affordability. If the customer is at the limit of their affordability, taking their car repayments into account can tip them over the edge of affordability.
By adding the vehicle payments to the mortgage loan, it spreads the debt over a much longer period and massively reduces the payments. However, without knowing the details of this particular case, we cannot comment specifically.”
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