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    • bobobski
    • By bobobski 16th May 17, 7:28 AM
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    bobobski
    Bank waited to tell me they have a problem
    • #1
    • 16th May 17, 7:28 AM
    Bank waited to tell me they have a problem 16th May 17 at 7:28 AM
    Hi all

    Quick background: through an independent broker I've applied for a 90% LTV mortgage; I am putting in 5% and a loan from a friend is covering the other 5%. I'm not interested in opinions on whether this is a good idea or not please; we've gone over it every way imaginable and decided to proceed this way.

    I have been upfront about this loan since day 1 with the broker. He told the bank even before applying for the MIP about it and they were fine; he included it on the application for the MIP and they were fine and they issued it that day; he then included it on the full application, which passed the initial stages, and they booked and paid for the valuation - and then they decided they don't like the loan so won't lend to me on this basis.

    This leaves me with two options: get a 95% mortgage - which is presumably what they want me to do so I'll pay them more interest - or lie and call the loan a "gift".

    Any thoughts here?
Page 1
    • AnotherJoe
    • By AnotherJoe 16th May 17, 7:34 AM
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    AnotherJoe
    • #2
    • 16th May 17, 7:34 AM
    • #2
    • 16th May 17, 7:34 AM
    Maybe there was not clarity about the loan or the terms on which is it repayable ?

    They are not bothered about the extra 5% interest, they are following the regulatory hoops they have to jump through to prove they did due diligence.
    • bobobski
    • By bobobski 16th May 17, 7:48 AM
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    bobobski
    • #3
    • 16th May 17, 7:48 AM
    • #3
    • 16th May 17, 7:48 AM
    Thing is, they didn't ask for more clarity, they just declined to continue. I'd offered to give them the spreadsheet which will calculate how much I owe to my friend but they didn't want that - all they ask for is what do I have to pay him back per month (not even how much I actually intend to pay him back). I can't see what law they'd be breaking if they offer me a mortgage where some of the deposit was a loan from a friend.
    • AnotherJoe
    • By AnotherJoe 16th May 17, 8:09 AM
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    AnotherJoe
    • #4
    • 16th May 17, 8:09 AM
    • #4
    • 16th May 17, 8:09 AM
    Affordability rules. Very few lenders will accept a loan you repay* as part of your deposit as it's the same as you being loaned more than whatever multiple of earnings they are prepared to loan you. If their maximum is say 4.5x earnings plus you are also borrowing an additional 0.5x then they are knowingly allowing someone to take a 5x.

    A lot of it comes down to broad brush rules that don't fit everyone, even if you can afford it or it's cheaper than renting you can still be denied.

    * a loan that isn't repayable until you sell the house may be allowed by some lenders.
    Last edited by AnotherJoe; 16-05-2017 at 8:12 AM.
    • StopIt
    • By StopIt 16th May 17, 8:25 AM
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    StopIt
    • #5
    • 16th May 17, 8:25 AM
    • #5
    • 16th May 17, 8:25 AM
    Of course they wont lend a 90% LTV based on 5% of the deposit being a loan.


    You can raise a complaint with whoever advised you, but there's little circumstance in which a loan can be used towards a deposit.
    • bobobski
    • By bobobski 16th May 17, 8:28 AM
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    bobobski
    • #6
    • 16th May 17, 8:28 AM
    • #6
    • 16th May 17, 8:28 AM
    AJ, the mortgage is for a lot less than 4x my salary. With the friend's loan, it's still under 4.1x salary. Besides, surely they factored that in at MIP stage?

    SI, the point is they initially said yes and actually incurred their own expenditure on that basis, and then changed their minds. I can't believe there is literally no circumstance in which it's possible, as if that were true they would have said no at the beginning; indeed, my broker would have told me not to bother framing it in these terms.
    • David White
    • By David White 16th May 17, 8:53 AM
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    David White
    • #7
    • 16th May 17, 8:53 AM
    • #7
    • 16th May 17, 8:53 AM
    If a lender was happy with you taking out a loan to cover your deposit they may as well just offer 100% mortgages again.

    Which lender is this?
    I am a Mortgage Broker
    You should note that this site doesn't check my status as a Mortgage Broker, 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.
    • AnotherJoe
    • By AnotherJoe 16th May 17, 8:59 AM
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    AnotherJoe
    • #8
    • 16th May 17, 8:59 AM
    • #8
    • 16th May 17, 8:59 AM
    This is why I wondered if they originally believed that the loan did not require immediate repayment and once that was made clear that it did, then they reverted to the position you'd expect. What did your broker say ? Did he or she know you intended to repay it on an ongoing basis ?
    • ACG
    • By ACG 16th May 17, 9:19 AM
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    ACG
    • #9
    • 16th May 17, 9:19 AM
    • #9
    • 16th May 17, 9:19 AM
    There are not many lenders who will accept a loan as part of the deposit, I can only think of one.

    If your broker disclosed it to the lender, then I think you need to complain to the lender and they should refund the val fee. If the broker did not disclose it then your complaint goes to the broker and they should refund your val fee.

    Why have you not just applied for a 95% mortgage?
    If I am being honest, if you came to me with what you have applied for, I would turn you away. You are making life overly complicated.
    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.
    • bobobski
    • By bobobski 17th May 17, 7:09 AM
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    bobobski
    David, but they are willing to give 95% mortgages and I'm intending to borrow 95%. Also, the friend's loan is completely unsecured, so it doesn't affect the bank's security in any way.

    AJ, possible, but we gave them all the information right at the beginning. My broker is just as annoyed as I am as he'd been led to believe that it was all going swimmingly and then they reject me fairly far down the line because of information they've had since day 0. Yes, he knows I intend to pay it on an ongoing basis; I've told him how much I need to pay and how much I intend to pay.

    ACG, why is it overly complicated to want to cut the interest rate by 1.5% by borrowing 5% and splitting the interest saved between my friend and me? If my broker had no issue with it, and until recently the bank had no problem with it, and people do it every day but they lie and call it a gift - why is my situation overly complicated? The weird thing is the lender is paying the valuation fee, so if they reject me now they've lost it. I guess someone cocked up internally and will be getting a talking to?
    • ACG
    • By ACG 17th May 17, 9:44 AM
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    ACG
    Because if you do not pay the mortgage, the house is repossessed, your friend then says he wants his 5%. Obviously as the po have first charge he will not get it, but they potentially have a legal matter to deal with.

    I'm not arguing with you, I am just saying the waters become a little muddied and at 90% ltv with high risk and minimal profit margins, they do not need your business when they can lend to 10 other people in your place.

    I accept your annoyed and I would be too in your shoes, but from experience with quirky cases, I have generally learnt where you are wasting your time. I know a lender who would accept the loan in principle but I still would not do the case.
    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.
    • amnblog
    • By amnblog 17th May 17, 11:37 AM
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    amnblog
    Bobobski, you are swimming against the tide here and have not assisted us by advising who the lender is.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, 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.
    • bobobski
    • By bobobski 18th May 17, 7:18 AM
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    bobobski
    Thanks guys, it's all come to a head now as the bank has made it clear that they won't accept our position, which is good because it makes the decision for me. That decision is partly never to take a mortgage with this bank They have wasted so much of my time, meaning my purchase has been delayed by weeks because of them, and they have potentially affected my ability to take a mortgage with someone else as well, so I couldn't be angrier at them. Obviously a !!!! up on their side as they'd spent money too, so I'll console myself with the fact that their mistake has cost them money.

    It doesn't feel right to name the bank, sorry, but I will say it's one of the big ones. But I'm posting this update for anyone in future hoping to do what I was hoping to do - the answer is "don't bother". It doesn't matter how much sense it makes for everyone and how well you address each and every one of the bank's concerns (my friend was willing to sign the form to say he has no right to claim the money back from me, but the bank still said no). If you don't fit in their box, they don't care. So they have lost my business and they have lost the money they have spent so far.

    Me having to take a 95% mortgage is worse for everyone - it's riskier for the bank than me taking a 90% mortgage and having a completely unsecured loan for 5% more, it means I have to spend more money, and it means my dear friend can't help me, which is all he wanted to do. We literally addressed all of their concerns but they just didn't care. The error we made was assuming there was any logic in what the bank requires.

    Ah well, onwards and upwards. Need to start looking at 95% mortgages now...
    • warby68
    • By warby68 18th May 17, 7:56 AM
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    warby68
    I know you're frustrated by the Bank's dithering and time wasted but to water it down simply you want to borrow 95% at 90% rates. They just aren't going to want to encourage this sort of 'fudge'. If you borrow 95% from them the price reflects the higher risk.

    You are after something that is practically non-existent. You sort of want the best of both worlds, to set up a complex deal but pay the price as if it was a bog standard one.
    • bobobski
    • By bobobski 18th May 17, 8:44 AM
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    bobobski
    Warby, I'm afraid I just don't agree. We asked them if they would accept a gift from my friend, and a vague intention that I repay that gift over the next few years by a series of smaller gifts, with him signing a document to say he cannot enforce those smaller gifts. They said no. How is that riskier to the bank than a 90% mortgage? As above, this is not an affordability issue; indeed, they calculated the affordability on the basis that I would be paying these smaller "gifts" when they gave me the MIP.

    There's a lot of generic talk on this thread about this being riskier for the bank, but as I said we addressed literally every single one of their concerns about risk and they still weren't happy. This is not a logical situation.
    Last edited by bobobski; 18-05-2017 at 8:45 AM. Reason: Clarity
    • bobobski
    • By bobobski 18th May 17, 8:48 AM
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    bobobski
    In fact, me taking a 90% mortgage is less risky for the bank as their security is a smaller percentage of the property, meaning they are more likely to recoup everything if the worst were to happen.
    • GarthThomas
    • By GarthThomas 18th May 17, 9:35 AM
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    GarthThomas
    You are asking for a customised product from a mainstream lender. It's not what they do, and just not worth their time and effort to pursue.

    You mas as we'll ask a fast food restaurant to make you a meal with unusual custom items, or a newsagent to sell you half a Times and half a Guardian.
    • AnotherJoe
    • By AnotherJoe 18th May 17, 10:17 AM
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    AnotherJoe
    Warby, I'm afraid I just don't agree. We asked them if they would accept a gift from my friend, and a vague intention that I repay that gift over the next few years by a series of smaller gifts, with him signing a document to say he cannot enforce those smaller gifts. They said no. How is that riskier to the bank than a 90% mortgage? As above, this is not an affordability issue; indeed, they calculated the affordability on the basis that I would be paying these smaller "gifts" when they gave me the MIP.

    There's a lot of generic talk on this thread about this being riskier for the bank, but as I said we addressed literally every single one of their concerns about risk and they still weren't happy. This is not a logical situation.
    Originally posted by bobobski
    Gross misuse of the word "gift" there bobobski when the fact is, its a loan. End of

    Anyway as said by recent posters, these organisations do cookie cutter stuff, and you are asking for custom.

    I agree they should have made it clear upfront this wasn't a starter, and I think that is a fair complaint to have. Everything else is really an irrelevance, whats in their interest, whats safer for them even if its true, because they sell what they sell, products that meet strict criteria, for numerous reasons, some financial, many and probably most though, to fulfill regulatory hoops.

    I was doing stuff with my pension yesterday and had to go through a list over the phone of 15 questions before I could proceed, not because it made sense, but because the pension company have to show they followed process and in case they have to defend themselves against complaints in future. Most of the questions were literally irrelevant in my circumstances but they arent going to have a customized set just for me, its easier and safer for them to have one set of questions that apply to all.

    Same with your mortgage. They should just have realized earlier on you didn't fit their criteria. Let it go.
    • bobobski
    • By bobobski 18th May 17, 8:41 PM
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    bobobski
    Gareth, not a customised product - an off the shelf product. It's no more effort than working out how any other applicant is funding their deposit. But your dissatisfaction with our outside-the-box thinking is noted, thank you.

    AJ, the interpretation of the word "gift" was a major part of this. If I intend to give you something, but you have no way of enforcing it and indeed you have signed away any rights you might have to enforce it, is that a gift or a loan? I personally really struggled with this for a long time, and it's part of the reason we all agreed to tell the bank it was a loan and not a gift. But as it became clear that "gift" didn't necessarily mean "absolutely never going to be repaid in any circumstances", I became more comfortable agreeing to calling it a gift provided the bank understood that my intention was to pay it back. It's moot anyway as they have rejected this. Turns out they are now doing their best to give me a 95% mortgage but I've told them to stick it where the sun don't shine. I don't want a long term relationship with a bank which starts it off by misleading me for weeks and potentially prejudicing my purchase.

    But yes, the lesson I have learned from this is that banks have to follow processes, and it doesn't matter whether or not those processes make sense or even prejudice the bank - rules are rules and people aren't allowed to even think about a slight variation of one of those rules. And as I said, I have let it go - I'm going with another bank. Just responding to the comments on here so people don't start with the mean comments about how I never returned to the thread
    • ACG
    • By ACG 18th May 17, 10:27 PM
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    ACG
    It is pretty simple, they have a book with their lending criteria. Part of that criteria is deposit source with a list of what they will accept. A loan from a friend is not in that list.

    There's been a mistake, mistakes happen. Life goes on. There is a lower risk to the bank of you default, but there is a higher risk in other areas. Your friend can not sign a gift form because it is not a gift and would become mortgage fraud. The bank would be opening themselves up to a complaint and litigation.

    As I have said, they can lend that money out 10 times over to someone who is less hassle (I do not mean that in an offensive way).

    Find a new lender at 95% or stick with them at 95% and you'll be fine.
    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.
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