Higher Lending criteria

[londonbairn]

Has anyone borrowed more than 500k recently? Initial conversations I have had have said that we will undergo a lot more scrutiny above that level; has anyone been through this? I presume they will go through our bank statements like a tooth comb, stress test on increasing rates etc?

We are in the planning stages at the moment to move up the ladder for early next year, so making sure all our ducks are in line.

We are fine financially as the initial mortgage payment would be less than 25% of take home per month (excl. yearly bonus), we don't have debt, credit ratings are high etc, but just intrigued to see what they will check and to what extent they question purchases etc.

 

[Tunney]

Yes, we borrowed over that amount last year.

There was a fair bit of scrutiny but nothing outrageous. Our main stumbling blocks were:

1) The mortgage provider asked us to list our credit cards and the current balances. We did so and they initially rejected the mortgage application because there were apparently credit cards that we hadn't declared. I questioned whether this was because the balances weren't correct but they categorically told that this wasn't the case. This leads to a bit of a panic as we think fraudsters had taken out cards in our name. It took a lot of digging for me to discover that it's because they asked us for the current balance of our credit cards and the credit reports that they rely on are out of date.

2) My partner is self-employed. Being self employed definitely leads to more scrutiny. The mortgage provider couldn't find her accountant on the approved accountants list. They demanded three years of bank statements with an explanation of every purchase over £500. Ridiculous. After contacting her accountant, we found that the accountancy firm had changed name recently and hadn't told anyone. Once that issue was resolved, the mortgage provider just wanted my partner's accounts for the last 12 months.

This was with a 66% LTV and borrowing ~2.25x our joint income. Our mortgage is with Chelsea Building Society.

 

[londonbairn]

I had (1) last time (a card I pay in full every month), was lagged and they thought it was a balance I didn't pay in full.

I think it's tighter now since April this year...have heard they will go through every line item on bank statements for few months asking to justify non essential spend etc

 

[Tunney]

That doesn't sound good - buying a house is stressful enough as it is. Good luck!

 

[MrMoonX]

I had (1) last time (a card I pay in full every month), was lagged and they thought it was a balance I didn't pay in full.

I think it's tighter now since April this year...have heard they will go through every line item on bank statements for few months asking to justify non essential spend etc

Yep my mate had them almost refuse him as he spent roughly £5 a day in costa, as it was "non-essential excessive spending" wtf? The system has got ridiculous now. If you can afford it and aren't using your overdraft in costa than the bank doesn't need to know

 

[Maccapacca]

Just have two bank accounts.

One nice and tidy, money in and bills out.

The other for day to day running.

 

[londonbairn]

That's what I have in principle with my AMEX and VISA, pay them off in full.

I am worried that they may treat is as debt technically, as when you look at the credit report, they show the closing balance, even though it's paid in full.

Half tempted to halt them and spend using my bank account..not ideal!

We are going to wait a few more months and bank another bonus, going to save more cash so reserves are healthy etc just in case.

 

[HangTime]

How big are the balances in relation to income? My guess is extremely low if you are going to borrow over £500k and pay less than 25% of take home towards the mortgage i.e. if you are taking home say £10k+/month then having a balance of say £2k on the credit cards shouldn't be a worry given you can demonstrate you pay it off every month. I guess it may come down to timing i.e. if you've just whacked a big expense (car/holiday etc) on it that particular month.

No personal experience mind, I just can't see why lenders would view such things as a red flag especially nowadays when nearly everyone uses a credit card due to simplicity, online shopping, protection etc. Someone taking home £1k/month with a £2k bill might be a worry, someone taking home £10k/month not so much.

 

[londonbairn]

They are low.. Had a good few chats with my mortgage company and broker..we're going to save a few more pennies in the next few months and bank another bonus so we have good amount of spare cash. My place was also valued on weekend, very surprised at how much it has appreciated; 78% more than when I bought it 4 years ago!!