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Holiday Home Loans Becoming Harder To Get For UK People

by Jim ONeil on August 1, 2011

in Mortgages

Many UK residents have experienced difficulty getting a mortgage in their home country due to lending restrictions. It is also now becoming more difficult for them to secure home loans for holiday residences in Italy, Spain, or France. Bank bureaucrats are preparing to roll out new rules and Brits are on the losing end in this situation.

Prospective British homebuyers of holiday properties in these countries are being put in a difficult situation. They are being required to choose between losing the home or paying more money for eleventh-hour deals that feature higher loans APR.

This has affected many who planned to purchase a home overseas during their summer holiday this year.

According to Athena Mortgages director John Busby, more mortgages are falling through due to banks being more cautious. French banks seem to be particularly wary of Brits. Individuals who have been saving for years and make under £60,000 annually will be among the hardest hit by the forthcoming lending changes.

The 2008 banking crisis led to these new rules, which will be rolled out over the next two years. Banks will be tightening lending. Buyers will be permitted to borrow up to six times their overall income and rental income from properties could be discounted.

This means a person earning £50,000 with a £200,000 UK mortgage may borrow no more than £100,000 to purchase a home abroad. French bank BNP Paribas made the most sweeping changes, reducing its interest-only mortgage term from 20 to only seven years.

Owners of second homes prefer interest-only cheap loans due to the lower monthly repayments. When the loan term expires, they remortgage or sell the house. The reduction in mortgage term equates to higher repayments and entering a new deal sooner.

Brits are also now finding their mortgage applications reviewed by a committee. In addition, many mortgage offers now include compulsory life insurance.

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