Been turned down by Natwest

alyxzandra

I am feeling so down about this. My fiance and I decided to sell our place to upgrade to a house (we are in a maisonette). There is no chain in either direction.

Unfortunately, last year was pure hell for us. Before deciding to move we built an extension as we had a child and our place was only a 1 bedroom. We got ripped off from the builders to the point the planning department were considering prosecution against them for contravening the building regulations. They took £14,000 from us (our savings) and made it appear the place was nearly done. There was a roof, electrics, etc. In fact, the roof was plywood, there was no insulation, electrics led to nowhere and the same with the pipes. They were caught by the planning officer pouring concrete into a floor that just had unbroken bricks! That is how we found out we were getting scammed. We had to pay out another £15,000 as we had a massive hole in the back of our livingroom and used our overdraft and credit cards to pay it. We complained to trading standards, but we were told unless they receive several complaints they cannot prosecute and if we took them to court the likelihood of collecting any money won would be very remote.

My mother is very ill; a double amputee on dialysis, and I had to send her a massive amount of money (she lives overseas). That was another £10,000. During all this I was on maternity leave, so bringing in less money (50% less of my wages). I already owed on my credit cards, but nowhere near what we owe now.

I was sick for 6 months (superbug infection from an operation) and went right from maternity onto sick leave. I was on unpaid maternity leave for 3 months before going on sick leave. While I was in hospital a few payments during that month were late, but they were all resolved as I have never been late and all charges were reversed.

While I was still ill, we had a flood in our home and the insurance company moved us out to a hotel for 5 weeks and then into a short term let. The insurance company paid for everything, but not all. We had to not only pay the excess for many items, but we found out we were underinsured. Thus, our mattress, sofas, flooring, etc were not all paid for (they made an offer, which did not cover half of it) and we've had to replace a lot of them from our own pocket. Thus, we bought the mattress and sofas on credit for 0% interest and have paid off half the mattress. The sofas are on 0% interest for 4 years and we will start making payments in October once the mattress is paid off.

We have a good credit rating and have never missed a mortgage payment. All of our bills are always paid on time. But, Natwest has turned us down on the basis of affordability. We have a buyer for our place and the equity is £44,000. But, our total debt is £48808. We found a house for £180,000 and we were planning on putting down a 15% deposit and use £11,000 towards the debts. Two of my credit cards are on rates of 6.54% and 5.9% rates for the life of the balance (these have the highest balance). Our total income is: £53950. We have 1 child and get £35 a month in tax credits, £80 in child benefit and £33 a month for a pension my fiance receives when his dad died.

Our mortgage advisor is not the most helpful with her attitude. She has contacted Halifax and A&L. I am currently with Halifax for my bank accounts and mortgage. I called London and Country and spoke to an advisor. He did not seem confident we would be able to get a mortgage due to affordability.

We sold our place in 2 weeks and cannot believe we are now being stumped by the mortgage. We budgeted everything with the advisor and we would have at least £400 left over a month. We plan on paying extra on the cards and will be renting a room out to a friend for extra money.

Does anyone have ideas about this?

ILW

Is your income over £50,000pa ?

Kavanne

have you thought of selling, renting for a while and getting your debt paid off before going back onto the housing ladder?

alyxzandra

ILW wrote: »

Is your income over £50,000pa ?

Yes, our combined income is over £50,000pa.

alyxzandra

Kavanne wrote: »

have you thought of selling, renting for a while and getting your debt paid off before going back onto the housing ladder?

We have thought of that. But, our mortgage is only £438 a month while renting would be about £900 per month.

madeupname1

Do you have to go through with the sale? Does it make sense to stay put for a bit (maybe a year), pay off some debt and then try again for a reasoanble mortgage?

Thrugelmir

Stay put and get to grips with your debt levels.

As you have written, life is full of unexpected downs. So why take on yet more debt and increase your debt levels even further.

Kavanne

alyxzandra wrote: »

We have thought of that. But, our mortgage is only £438 a month while renting would be about £900 per month.

Stay put then? Put the extra income into paying off your debt and sorting out your extension?

There's not much you can do immediately if you've been turned down (other than try other lenders), especially with that amount of debt. I think you need to bide your time and get that debt as low as possible before you come back to applying for a mortgage.

Trollfever

http://forums.moneysavingexpert.com/showthread.html?p=27979005&highlight=#post27979005

Annisele

So, in brief:

Two adults, one child.
Joint income of £53,950 pa.
Total debt (excluding mortgage) £48,808
Equity in flat £44,000
Want to sell flat and buy new house for £180,000, using £27k of equity in flat as a deposit.
Not wanting to rent (because rent would be £900pm and current mortgage £438pm).
Credit history fine.

It does sound as though you've had a bloody awful year. Unfortunately for you lenders won't care too much about why you have debts; they will just look at the cold hard cash.

I'm afraid I'm not surprised that NatWest has turned you down. In effect, you have borrowed your deposit of £27k (in that the deposit will have come from credit card companies and other lenders rather than from your savings). Lenders want at least a 10% deposit, and you don't (in real terms) have a deposit at all. I think that in your current circumstances it's unlikely that you'll get the £153k or so that you want to borrow to buy the new house. You're talking 3x joint salary, which isn't unreasonable in itself - but you'd be taking £37k of relatively expensive credit card debt with you, which pushes affordability beyond what lenders are likely to consider a sensible limit.

Have you exchanged with your buyers yet? If not, you might want to seriously consider staying put and saving to reduce the debt. You could certainly try other lenders, but you should be prepared for the possibility that they might say no. (And I think it would be kind to your buyers to let them know that you might not be selling - save them from paying out on a survey etc for now).

If you have exchanged, then you might have to move into rented - at least temporarily. Again, if you consider the possibility now then you'll be more prepared if it happens.

alyxzandra

Annisele wrote: »

So, in brief:

Two adults, one child.
Joint income of £53,950 pa.
Total debt (excluding mortgage) £48,808
Equity in flat £44,000
Want to sell flat and buy new house for £180,000, using £27k of equity in flat as a deposit.
Not wanting to rent (because rent would be £900pm and current mortgage £438pm).
Credit history fine.

It does sound as though you've had a bloody awful year. Unfortunately for you lenders won't care too much about why you have debts; they will just look at the cold hard cash.

I'm afraid I'm not surprised that NatWest has turned you down. In effect, you have borrowed your deposit of £27k (in that the deposit will have come from credit card companies and other lenders rather than from your savings). Lenders want at least a 10% deposit, and you don't (in real terms) have a deposit at all. I think that in your current circumstances it's unlikely that you'll get the £153k or so that you want to borrow to buy the new house. You're talking 3x joint salary, which isn't unreasonable in itself - but you'd be taking £37k of relatively expensive credit card debt with you, which pushes affordability beyond what lenders are likely to consider a sensible limit.

Have you exchanged with your buyers yet? If not, you might want to seriously consider staying put and saving to reduce the debt. You could certainly try other lenders, but you should be prepared for the possibility that they might say no. (And I think it would be kind to your buyers to let them know that you might not be selling - save them from paying out on a survey etc for now).

If you have exchanged, then you might have to move into rented - at least temporarily. Again, if you consider the possibility now then you'll be more prepared if it happens.

Our year has been horrible, but things are now looking up for us. I always said things are fine as long as we have our health, but I did not even have that this past year!

We are discussing about staying put. Our home is lovely, but we would like another child and I am already a much older mother to one. My time to have another child is rapidly fading away. Our place is a 2 bedroom place and we would not be able to have another child in here as the second bedroom is barely big enough for our son.

We discussed the idea of getting a larger place and saw a financial advisor. It appeared we would be better off putting a 10% deposit down on a larger place and paying off a large chunk of our credit cards with what is left over. When we did some number crunching it seemed quite reasonable and that is when we thought, yes, put the place on the market, get a larger place and it appeared we would be better off.

But, then we were told we needed to come up with a 15% deposit and that has changed things quite a bit. When I said about the 10% deposit I was told that the products have changed and there are very few of them about like there were when we originally went down this road. To be honest, I am a bit uneasy about doing a 15% deposit at this stage and even if we are accepted on the off chance we are not too sure about doing it. And of course, this has made us feel quite down as it seems our chances for another child will not be feasible as we do not have enough room where we live.

Unfortunately for our buyer, he arranged a survey within a few days of us accepting his offer. We have not exchanged contracts yet, but it seems like we may be pulling out of this.