Mortgage / Debt / Further Advance advice needed

sidneysides

We currently have a professional mortgage with Scottish Widows. This allows you to borrow up to 100% LTV as we are both tecahers in secure jobs with a gross income of approx £66k
Our house is worth approx £230000 (subject to valuation)

Here's the problem I face.
We applied for a Further Advance in March this year and I put on the form (amongst a few other things) the purpose was debt consolidation. This was approved, we had the money, paid off SOME of the credit cards but then made some home improvements, bought new furniture etc.

There was still scope to apply for more as we were only at £193000 so in August this year I spoke with them about applying for more (another £31000) to be used for further debt consolidation and to cover my wife's maternity pay. The sales department could see no problem with that, so 2 weeks ago, i applied. We are having a baby after Christmas, so we've bought buggy, cot, done out a playroom etc, new bathroom, and put this onto a credit card, knowing that this new Further Advance would be paying it off.

We owe about 16k on Credit Cards (which we were going to pay back with this advance) and we were going to pay off our car loans. We had carefully worked out a budget for this (Scottish Widows said that our affordability was never in question).

THE PROBLEM
I received a phone call from them yesterday saying that they are refusing to give us what we were asking for as they could see that the previous further advance was not used for the purpose stated on the form (debt consolidation). They said that our borrowing now is more than it was then. This is true - a new car loan was set up, and , as I've stated. some purchasing has benn made on Credit Cards. Some, not all, was used for debt consolidation.

They have only offered 90% LTV, which means that our budget is blown out of the window, and we will end up in more debt, as payment on Credit Cards and loans is obviously higher every month than it would be if it was in with the mortgage.

I admit we haven't been graet with our finances, but this was our chance to get us working with a sensible budget again. If we can't pay off these things, then our monthly outgoings (although not more than incoming) are unrealistic.

My argument with then was that, it was never mentioned when I applied in March that if the funds weren't used EXACTLY as I put on the form, then this would affect my future applications. If this was made clear, then I would have specified to the letter what it was to be used for.

We chose Scottish Widows professional mortgage because of the flexibility of the 100%LTV. I feel that they are taking this flexibility away without good communication in the first place.

I've emailed them about this and am waiting for a response.

If they won't budge, then I'm stuck. I could remortgage (with them or with another company), but I am tied in on a fixed for 3 years, and would end up paying a 3% charge (about 5800k) which doesn't make financial sense.

I realise that we haven't managed our finances well up to this point (please don't reiterate that point) but our carefully planned budget based on 31000k was manageable. Now we are stuck.

Any advice would be appreciated

Thank you

sidneysides

I am still awaiting their call

mountainofdebt

I think you have to take the blame here.

You clearly stated on the application form that the money would be used for debt consolidation - theoretically the amount of debt you would have had would not have changed - it would have been in a different pot so to speak.

However you didn't so now you do have more debt than you had before. You have to look at it from Scottish Widows point of view - you applied for a loan and then you used the funds for a completely different purpose.

Having said all that I think - especially given yesterday's news - Scottish Widows may have done you a favour by not allowing you to transfer your unsecured debt to secured debt, especially if you haven't seen the light and got your spending under control.

That being the end of the lecture, I think your best course of action would be to post a list of all your income and expenditure on the debt free wanabee board - which includes details of your debt with APRs, limits and balances - and I am sure that the guys on that board can offer suggestions for you to improve your budget.

regularsaver1

I agree , you did not use the further advance for the intended purpose. This would have formed part of their affordability calculation.

They have done a new assessment and can see more debt than before.

Whats the problem? It may have been a good idea to wait until you'd known to but the goods - unless you can sell some things on ebay or get a cheaper car to compensate?

In their eyes - whats to say that if you borrowed this money you wouldn't spend it on other things again? - and therefore they could be liable for putting you in a bad situation and being irresponsible lenders

They have been responsible in investigating this

loveandlight

I think you were very lucky that your lender gave you a free reign over the advance money you borrowed last time. That's not a criticism of you by the way because I'm sure if you'd known then, what you know now, you would have done things differently. There's also a chance that even if you take up your lenders offer this time around to lend you 90% LTV that they will want to retain control over repaying your debts so you might not have the degree of control over the advance monies that you think.

I say this because I posted an earlier message about the difference between debt consolidation mortgage and a remortgage to withdraw some equity. I'm going through a remortgage at the moment and although I am carrying credit card debt of £33000, it's debt I've incurred recently to renovate a property. My new lender is retaining complete control over £20,000 of the advance to ensure I do use the money to repay the debt. The balance I'll be paying off in a few months time. I don't mind repaying it because that was my intention anyway but despite having an excellent credit report and more than sufficient income to cover the borrowing I have still had to sign Declarations and give formal undertakings signed in the presence of witnesses.

sidneysides

I'm resigned to the 90% now really. I'm happy if they take control as all of it will pay of 2 credit cards immediately anyway. The only way I can afford to do the 90% is go to interest only for 12 -24 months until my income has risen and ti amalgamate 2 car loans together to finish at the same time, rather than one of them finishing in 12 months. I didn't want to do that, as I would prefer to let it run it's course and clear it, but affordability is not posssible. Even then, I still have one credit card debt to pay, although on a 0% and paying off £120 a month I can manage that.

I've written them a letter asking if they would consider 92.5% to cover the other credit card rather than the 90%, but don't know whether I will be successful or not.

I see this as a big wake up call. We've been freely spending thinking that we would get this money - now we're not, we're struggling.