Can they charge this?

davey4444

Hi, my girlfriend and I are FTBers and, through a broker, were pre-approved for a mortgage of £186k. Barclays also pre-approved us for approximately this amount and we went with them directly actually borrowing £144,875 with a 5% deposit.
The Woolwich (underwriters for Barlcays) sent us all of the paperwork which we signed and returned together with a cheque for £990 (£495 for a survey and £495 for the mortgage application). However they've now called us saying that there is a "credit issue" and we must pay a 10% deposit (their actual words were that we can only borrow 90% but it's the same difference) and this is really out of our budget. They are also saying that the £495 is non-refundable whatever we do but at the moment they can't do anything because they don't have a separate cheque for this amount.
I'm really after 2 bits of advice here, firstly can they really charge us the application fee if they are now changing the mortgage details so drastically? We paid them the application fee for a 5% deposit mortgage, not a 10% one and would never have gone with them otherwise.
Secondly they will not disclose reason for this decision, none of us have a terrible credit rating although we do have money (about £5000) on credit cards which are paid regularly.

Thanks in advance.

homer_j_3

Could you define pre approved please. Did you get a decision in principal? Regardless of this the application fee is payable for the lender to process your application and if they have found something that wasnt disclosed or not realised at the point of initial acceptance then they can argue that they have processed and effectively done the work.

To be honest, this could have happened whether you used a broker or not but I usually advise my clients to add these fees on to the loan(if allowed by lender) and then either send a cheque once completed so you do not incurr interest(once again if the product allows). This minimises your risk as you do not pay anything if it doesnt proceed.

I understand that you must be feeling very annoyed at the moment but I think there is very little you can do other than make a formal complaint and see where that takes you.

davey4444

Thanks for your reply, I was guessing as much and that it's just another lesson to learn when getting a mortgage - nothing is certain until you get the keys!
I'm not sure about the "in-principle" bit, I'll have to check on that.

Do you think it's worth going with another provider or are we likely to face the same scenario again?

dunstonh

In other words, after the application has gone to the underwriters, they have decided that you are an increased credit risk and require a greater deposit.

They can do this and the application fee ican be kept.

You are not pre-approved. You get a decision in principle. This is an agreement to lend you money on the terms initially given unless something later comes up which prevents them from doing that. Property values not coming out high enough or credit not disclosed can be common examples of when this happens.

homer_j_3

I cant say "no it wont happen again." or "yes most probable" because I do not know what you exactly got refused for.

I would use a broker personally and just ask them to protect you against this again.

It could be worthwhile you ordering a copy of your credit references for both you and the gf before you do anything further to see whats on there.

You can get these through equifax or experian. (just google). I think one is available online but they need to send you a pin so its not immediate (as far as I am aware)

If your credit rating is good then it may have just been lending policy that caught you out but thats what a broker will know better than you.

davey4444

Thanks for your help on this. We're now going to ask Barclays for a lower rate since we would be putting down a 10% deposit rather than 5.

dunstonh

Good call. Next time, remember to go to a whole of market mortgage advisor so you avoid this re-occuring.

TangentMan

It is not entirely clear how a broker would have helped prevent this. They may well have advised about adding the fee to the loan and then paying it up front later but equally they may not.

I think, the short answer is yes, they can charge this on the basis that they have done work on your behalf and something has cropped up. Did they definitely say 90% or did they give you a figure which happens to translate to 90%? The valuation may have reduced the value of the property and, naturally, lenders take the lower figure to base their decisions on.

davey4444

Thanks for your reply. Barclays say that The Woolwich (the underwriters) use the credit company (I think it's Equifax) for all mortgages over 90% and this is where we've "failed" but apparently if it's a 90% mortgage then they don't have to go through this check.
It all sounds a bit strange to me but I'm not sure what choices we've got. I suppose that going through a broker may have helped (one we've spoken to said that the application fee IS refundable if anything changes).

dunstonh

Mortage brokers would have seen how tight the lending decision would have been and probably wouldnt have recommended a lender that offers such different terms when it is that close a decision.

davey4444

Yep, I think that we're learnt a valuable (£495!!!) lesson from this. Currently speaking to our broker and he's looking into alternatives and he agrees that this could have been avoidable...