Common mortgage misconceptions made clear.

Conrad

I have noticed over a long period the same misconceptions appearing regularly here, so I wanted to make this thread as a one stop solution to avoid going round the houses.

I've included the common 'Jo Public' old wives tale misconceptions I see regularly so as to help others;


1) Removing a name from a mortgage.

You cannot simply remove a name unless you or a new incomming applicant can demonstrate they have the credit rating and income and status to support the mortgage and that the loan as a whole meets thier current criteria - for example not over 90%.


2) Transfering a mortgage to a new property;

There is no such thing.
ALWAYS and in accordance with law and regulations a new mortgage contract is made and underwriten.

YOU CAN sometimes transfer the rate, but that has nothing to do with 'transfering a mortgage'.

Some will think they did do this but they are mistaken. An underwriting process is still followed - afterall for all the lender knows you have just been made redunadant or started racking up debt to fuel a drug habit.

A portable mortgage merely implies the same rate can be taken to a new home but it does not mean that the lender does not have to still ensure you meet thier lending criteria.
Now before someone says this > "but Im paying my current mortgage, surely thats proof enough" - NO IT IS NOT. Again at a respossesion hearing the judge may throw out the lenders request to repossess if lending checks were not made and the defnece a lender may rely upon along the line 'but they paid the exisiting mortgage at the time of moving home' would be cast aside as merely circumstancial and not evidencial.

3) No such thing as lending on equity.

Time and again I see the comment 'surely the Bank will lend as I have a massive amount of equity'.

In law such lending would be faulty and indeed illegal now.
WHY? - because in the event of a subsequent repossession hearing the Judge may not grant repossession and the lender may be punished where it was shown the lending was based merely on equity as opposed to ability to pay the loan monthly.


4) "My experian score is 989".

We see time and again people with a supposedly high score from a major credit reference agency, then be declined by a lender on credit score.

WHY? > Lenders use thier own internal models and merely refer to these third party scores so please folks keep in mind third party scores are not necesarily something to hang your hat on.


5) "I've been declined on credit score but I've not had a bad debt".

Credit scoring looks at dozens of factors, and past credit history is ONLY ONE element.

Lenders look at statistical trends and then compare your profile to these trends.
EXAMPLE - it was found the following groups were MUCH more likely to be repossessed:

Those that cant be bothered to give a work landline phone number.
Those with a non stable history - and tendancy to address / job hop.
Smokers.
Those that lived in certain areas.

Now of course being a smoker doesn't necessarily imply you will get into trouble of course, but the plain cold truth as shown in the stats is that repossession cases had a high proportion of smokers.

Similarly those that habve not been bothered to go on electoral role are much more likely to get into trouble according to repossession stats. It is felt it's something to do with people overall attitude and organisational mentailty or lack of.

Good luck

dunstonh

Seems like a good list. There have been a number of threads recently covering the same topics you mention. Maybe it is worth this thread being a sticky as it is a good FAQ.

somethingcorporate

+1

Very good FAQ, thanks Conrad.

Peelerfart

+1 from me too.

I found that stat on smokers and repossession interesting - wonder why ?

opinions4u

Peelerfart wrote: »

+1 from me too.

I found that stat on smokers and repossession interesting - wonder why ?

Perhaps having a lower disposable income due to their addiction to a state legalised drug has something to do with it.

A couple who smoke 20 a day each will be £300+ a month worse off then non-smokers.

Nanao_2

This is great Conrad, thanks for this.

Thrugelmir

A good post like this should be made a sticky.

incher

I agree - it should be made a sticky. Probably won't stop people posting new threads but at least then they could just be pointed in the direction of this one!

dimbo61

You will be telling people to stop smoking next!
Lung cancer,strokes,heart attacks, high blood pressure,throat/mouth cancer and a habit which costs £12 a day for 40 fags.

Radionotme

The 'can't be bothered' to put a work landline down is interesting to me, as I'd very rarely do it. The chances are, especially with something like mortgages, that any calls relating to the people I gave the number to, would be very personal and likely to involve financial discussions. Because of that I'm far more likely to put my mobile number down so I can ensure I can go somewhere private to discuss the issue rather than at my desk.
Plus there are plenty of people such as sales reps who aren't likely to see a landline phone for days at a time, much less be likely to be there to answer it.

The others all make sense, and I'd agree to this being a sticky. Might need a different title though.

ik1

what about having a recent credit check on your file? need to purchase a mobile monthly contract and likely to apply for mortgage soon. I have heard best not to apply for any other credit just before a mortgage application. I do have very good credit history. so is this true?