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  • FIRST POST
    • hollywoodch
    • By hollywoodch 11th Oct 16, 8:34 AM
    • 6Posts
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    hollywoodch
    Reason for borrowing extra on a mortgage?
    • #1
    • 11th Oct 16, 8:34 AM
    Reason for borrowing extra on a mortgage? 11th Oct 16 at 8:34 AM
    Hello all,

    I have a daft question, but one that I can't find an answer to anywhere.

    It’s to do with giving a reason for extra borrowing on a mortgage. I have had a brief conversation on the phone with my current mortgage supplier and in principle on affordability; they have said that the amount I wish to borrow could be possible, subject to more in depth checks.

    I was asked on the call about why I want the extra money. My question is that I wondered about what proof they may therefore need on the actual spend of this extra money down the line? Would they want proof on any future spend in terms of receipts / follow up checks etc?

    The situation is that I have nigh on completed an extension but borrowed from a family member to do so. Their personal situation has changed and they'd like the money back sooner than we'd originally agreed. So strictly speaking, the money I’m borrowing on top of my mortgage will be used to pay back a family member, to pay for home improvements, but on a technicality, it's not directly being spent on home improvements.

    Would this be an issue? Also, I'm sure like many who borrow extra, I'd like to just swell my bank balance too with a little more that wouldn’t be on home improvements, would there be any issue on this?

    Completely broadening the question, what checks are in place should anyone borrow more on the mortgage and then not spend it on areas that they originally say the use was for?

    If the money is paid back as agreed what come back (if any) would a lender have in these types of situations?
    As I say, I’m sure this is a daft question, but any help / advice gratefully received.
Page 1
    • lee111s
    • By lee111s 11th Oct 16, 9:32 AM
    • 2,463 Posts
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    lee111s
    • #2
    • 11th Oct 16, 9:32 AM
    • #2
    • 11th Oct 16, 9:32 AM
    You're using the money for home improvements. I wouldn't say what you're doing is fraudulent.
    • muhandis
    • By muhandis 11th Oct 16, 9:37 AM
    • 204 Posts
    • 81 Thanks
    muhandis
    • #3
    • 11th Oct 16, 9:37 AM
    • #3
    • 11th Oct 16, 9:37 AM
    The couple of times that I have taken out a personal loan (unsecured debt and hence more risky for the lender) in the past, I have never been queried on or asked to prove whether I spent in on what I said in my application.

    Borrowing extra on a mortgage is essentially a bank lending you money based on their charge on your house ie far less risky than unsecured debt. I doubt they'd care enough to check what you do with the money after they've lent it to you. Having said that, I've never borrowed extra on my mortgage, so can't say for sure from experience.

    I think you might be overthinking it a bit.

    Completely broadening the question, what checks are in place should anyone borrow more on the mortgage and then not spend it on areas that they originally say the use was for?
    by hollywoodch;71
    435041
    • kingstreet
    • By kingstreet 11th Oct 16, 9:39 AM
    • 30,009 Posts
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    kingstreet
    • #4
    • 11th Oct 16, 9:39 AM
    • #4
    • 11th Oct 16, 9:39 AM
    Lenders will class this as debt consolidation and may apply a lower maximum loan to value as a result.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • hollywoodch
    • By hollywoodch 11th Oct 16, 9:42 AM
    • 6 Posts
    • 1 Thanks
    hollywoodch
    • #5
    • 11th Oct 16, 9:42 AM
    • #5
    • 11th Oct 16, 9:42 AM
    Thanks Lee111s.......I just didn’t know how much detail to go into when it comes to the further checks that they'll do. I don’t want them to renege on the offer of extra money on a ‘technicality’ and that just got me thinking about what ‘proof’ lenders ever may seek to show you spent funds where you said that you did.



    Could you borrow tens of thousands citing 'home improvements' but actually blow it on a sports car!? (I'm NOT planning to do that by the way, but just intrigued by what comeback they'd ever have or how you may need to show you spent it where you said you did!)
    • hollywoodch
    • By hollywoodch 11th Oct 16, 9:43 AM
    • 6 Posts
    • 1 Thanks
    hollywoodch
    • #6
    • 11th Oct 16, 9:43 AM
    • #6
    • 11th Oct 16, 9:43 AM
    I may well be.....its the first time that i've borrowed more on the mortgage and like, techncially it's not going to spent on home improvements as I told them that it would be.
    • Thrugelmir
    • By Thrugelmir 11th Oct 16, 9:51 AM
    • 51,207 Posts
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    Thrugelmir
    • #7
    • 11th Oct 16, 9:51 AM
    • #7
    • 11th Oct 16, 9:51 AM
    If the money has been spent on "home improvements" you've the evidence i.e. invoices and physical goods to evidence the fact. Also that you can show the money being lent to you from the family member.

    As it maybe the case that a surveyor will be sent round to value the property.

    Worth noting that not all improvements add value nor does the VAT element of the spend add value either.
    “A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against ‘a rainy day’.”
    • hollywoodch
    • By hollywoodch 11th Oct 16, 10:14 AM
    • 6 Posts
    • 1 Thanks
    hollywoodch
    • #8
    • 11th Oct 16, 10:14 AM
    • #8
    • 11th Oct 16, 10:14 AM
    Thanks Thrugelmir - do you think that such 'post-lending' spotchecks are commonplace? Wouldn't the surveyor be most likely sent before lending happens though, rather than after? Or are you suggesting both?
    • ACG
    • By ACG 11th Oct 16, 10:15 AM
    • 13,472 Posts
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    ACG
    • #9
    • 11th Oct 16, 10:15 AM
    • #9
    • 11th Oct 16, 10:15 AM
    Who is the lender?
    How much is your current mortgage?
    How much extra do you want?
    How much is your home valued at as it stands today? (not when the works are complete).
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • hollywoodch
    • By hollywoodch 11th Oct 16, 10:18 AM
    • 6 Posts
    • 1 Thanks
    hollywoodch
    Hi ACG

    Who is the lender? - Santander
    How much is your current mortgage? - £140,000
    How much extra do you want? £50,000
    How much is your home valued at as it stands today? (not when the works are complete) £250,000

    Thanks in advance!
    • ACG
    • By ACG 11th Oct 16, 11:12 AM
    • 13,472 Posts
    • 6,625 Thanks
    ACG
    You might be alright...kind of.
    According to the santander website they go up to 75% for debt consolidation. Which is £187,500. So "only" £2500 shy of what you need.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • Thrugelmir
    • By Thrugelmir 11th Oct 16, 11:33 AM
    • 51,207 Posts
    • 42,984 Thanks
    Thrugelmir
    Thanks Thrugelmir - do you think that such 'post-lending' spotchecks are commonplace? Wouldn't the surveyor be most likely sent before lending happens though, rather than after? Or are you suggesting both?
    Originally posted by hollywoodch
    Who knows what may be asked. In general terms and in no way commenting on your specific case. Experienced financial professionals can smell a rat a mile off. I.E. applicants are evasive, struggle to provide evidence without being questioned, ask if something else will do etc etc.

    I always recommend a proactive approach. Ok circumstances are unusual and out of the ordinary. However I'm going to provide you Mr Lender with a enough evidence to support the application without being asked. Makes matters transparent and builds a relationship between the parties concerned.
    “A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against ‘a rainy day’.”
    • hollywoodch
    • By hollywoodch 11th Oct 16, 11:37 AM
    • 6 Posts
    • 1 Thanks
    hollywoodch
    Thanks for checking that ACG. I wonder if I am best saying that it is for debt consolidation then?

    If needed, I could shave a bit off - like I mentioned, a portion was just to make my bank balance a tad more healthy in light of all the spend (outside of the money lent to me) on the extension.

    I was just really curious as to how / what checks are implemented post lending, to see if you spent it on what you orginially stated. Like my reply above, what's to stop one saying 'home improvements' and buying a super car instead!? Slightly ridiculous example, but hopefully you get my point!
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