Does my HSBC mortgage application stand a chance?

paulisarobot

I've recently put in an application to HSBC to borrow £142,000 on a property I'm paying £164,000 for so my LTV is about 86%. I've heard that HSBC are VERY picky so I'm wondering what people's opinions are on whether or not I stand a good chance of being approved. .

Employment Info
I'm the founding director of a company with a 33% share. Company formed as a partnership in 2007 and went limited in 2008. Coincidentally this is the last month of our 3rd financial year so I have a full 3years accounts.

07-08 Salary £23,488 net / £18,130 gross / partnership
08-09 Salary £47,600 net / £34,200 gross / ltd
09-10 Salary £41,700 net / £30,000 gross / ltd

We aim for a £30,000 gross annual but decided to take an additional dividend at the end of the financial year 08-09 as a treat. There's a chance that we may decide to take some more next week but if not 09-10 will be as shown above

Since going limited our salary is a mix of PAYE and dividends - we take PAYE up to the tax threshold and take the remainder in a mix of monthly and quarterly dividends.

Other Considerations

• I've been an HSBC customer for over 15 years and have always payed my full salary into my HSBC current account.
• I have 1 credit card, which is an HSBC mastercard. Current balance is £4000, some missed payments in last 6 months but I'll go on to explain...
• I do not have any other loans or credit commitments.
• Home owner since 2006, never missed a payment

Now, aside from any complication arrising from 'self employment', the thing I'm most worried about is an issue I've had with my HSBC credit card. I had a zero balance til around Sep09 when I paid for some flights and a vacation for around £3000.

The last time there was any substantial balance on the card was 2006. I had around a £4000 balance had a direct debit set up to pay the minimum payment, I made minimum payments for around 6 months then cleared the whole balance in one shot. Aside from that amount which was for home improvements, I've always avoided using it as much as possible.

In January this year I tried to make a purchase on the card and the transaction was declined - I rang HSBC and was told this was because I'd missed 3 consecutive payment. This came as an absolute shock as I thought my direct debit would occur for the minimum repayment and I hadn't recieved any notification by post. While HSBC claim to have sent letters, and I do believe they will have, the block of flats I live in is particularly susceptible to post being stolen but ofcourse this will sound like a ridiculous excuse to anyone I tell.

I was pretty confused about what had happened to the old direct debit, I thought the direct debit I previously had set up for the minimum payment would just kick back in when I had any balance on the card. When I spoke to the bank I couldn't get a good explaination from them as to why this hadn't happened so I instructed them to set up a new direct debit immediately and I also transferred £500 to the card on the spot.

In Febuary I checked my internet banking on the date I'd instructed these payments to occur (15th) and noticed that nothing had happened so I called the bank and was told this was because the £500 I paid cancelled the need for another payment that month.

I was surprised at the end of March to recieve a letter from HSBC stating that I'd missed the payment on my card. When I called I was told that this was because it takes 3 months for a direct debit to take effect! This definately wasn't something I was told when I set it up otherwise I wouldn't have called them to ask why February's payment hadn't occured! I managed to get the late payment chare refunded but I can't imagine the situation is going to look good to the underwriter.

The frustrating thing is I sure as hell haven't missed payments intentionally or by lack of funds. Nevertheless I'm terrified that this mix up will cause a problem with my application.

Do you think I'm going to face a huge problem when my application gets to the underwriter?

Should I hedge my bets and consider starting an application with another provider?

Will I struggle to do this because of the credit score HSBC has only very recently carried out?

bugbabe1970

I have had a lot of credit problems in the past, including Bankruptcy in 2001, which I was discharged from in 2003 as I sold my house and paid my creditors. I applied for a 90% mortgage in 2008 with the Halifax and was accepted straight away over the phone. I was told by the advisor that when applying for your mortgage the lender looks at you affordability rather than your credit history. I am no expert at all and i am sure some lovely people will be along to give you more advice, but in my experience it has been more difficult to get a credit card than it was to get a mortgage.

milliebear00001

bugbabe1970 wrote: »

I have had a lot of credit problems in the past, including Bankruptcy in 2001, which I was discharged from in 2003 as I sold my house and paid my creditors. I applied for a 90% mortgage in 2008 with the Halifax and was accepted straight away over the phone. I was told by the advisor that when applying for your mortgage the lender looks at you affordability rather than your credit history. I am no expert at all and i am sure some lovely people will be along to give you more advice, but in my experience it has been more difficult to get a credit card than it was to get a mortgage.

I think you may find that's because it was 2008! The current financial climate is such that lenders are very wary of anyone with any credit problems and many (as far as I have been advised) will not consider you with even one default.

You really need to clarify who is to blame for your missed payments. If it's genuinely not your fault then it's really important you fight to get those defaults removed - or at least get a mitigating note put on them. The see a good broker who should be able to advise you which lenders are likely to be most favourable.

PIP83

It sounds to me like you didn't have any balance on your credit card for ages and so no payments were required and the direct debit was cancelled under the 13 month dormancy rule

I was pleasantly surprised a few weeks ago to see an article saying that in situations like this, it is the recipient (not the payee) who is responsible for ensuring the direct debit still exists.

thisismoney.co.uk/savings-and-banking/article.html?in_article_id=500315&in_page_id=7

So if this is the reason behind your missed payments then HSBC are to blame

paulisarobot

Interesting points so far thanks.

I think it's going to be sensible for me to put together some kind of covering letter about the credit card to be sent through to the underwriter along with my payslips and company accounts.

Would making another lump payment on it help at all - say £500-£1000 before thing get to the underwriter? I don't want to assume it will and make a payment as that money reduces my safety margin in the cost to move.

Thanks for responses so far

iamana1ias

paulisarobot wrote: »

07-08 Salary £23,488 net / £18,130 gross / partnership
08-09 Salary £47,600 net / £34,200 gross / ltd
09-10 Salary £41,700 net / £30,000 gross / ltd

This doesn't make sense. Gross is before tax and NI and net is after, so net should always be less than gross.

VIGILANT22

paulisarobot

wow....lengthy post...have you ever considered speaking with someone,,,,:)

Any

Have you spoken to them at all yet? When I applied for mortgage with HSBC they asked me all sort of questions over the phone to find out whether they would consider me and approved me in principal and only then we went ahead with the paperwork..

However I am beginning to regret I ever applied with them because they are completely useless. They keep telling me they don't have my payslips and then they admitt they have them, but when I call them the day later we are having the same conversation again... I am not sure whether I ever get to the point of getting the mortgage.

fooboo

I don't think its beyond the realms of possibility. Presuming the limited company shows a profit. The hard parts are, 86% LTV, 3.77 salary multiple and whatever is going on on that credit card.

Tell me you've applied in a branch!? They will argue your case with the underwriters, online/phone the application is just put in front of the underwriters for their decision...

Good luck!

RX-78

I'm a newly registered selfemployed with less than a year's account but we've managed to get 75% mortgage offer on 320k house with HSBC.

We thought we had no chance and infact started to look at mortgage through brokers when to our pleasant surprise they approved it. I suppose we had a few things in our favour as my partner is employed (but my net income is twice as much) and I have been in the same profession for 10 years and the business partnership I'm entering has over 30 years of account with good stable profit over this time. And our affordability came to spenditure (including mortgage) less than 33% of our total income as we have no debt and inexpensive life style.

Definitly go into branch as fooboo says - my OH actually called HSBC on phone first and they weren't too keen but got one of their branch advisor to call us back to talk to us both. We qualified for the premier account and we had the mortgage manager & premier manager both fighting for our case!