Second credit check on mortgage application?

ReKo

Hi all,

Great forum, I've been a long time reader/beneficiary. I finally have a question I'm hoping you can help me answer.

I am currently in the process of buying a new house. I have another house which I am currently letting out. The house I am buying will be mine to live in. There is no chain.

I've had to jump through all sorts of hoops to get this mortgage accepted. The lender has been very strict on their criteria, but happily I made it and all being well (valuation coming out ok) I will get the mortgage offer.

My problem is about 50% of my deposit has been held up and I won't be able to get access to it for at least 2 months. This isn't a problem for me as I can use a credit card/s to bridge the gap until the money comes through.

What I am very worried about is that the lender will do a last minute credit check once the deposit has been transfered to the solicitor and pull the plug on the whole thing.

Is this a likelyhood? I've worked so hard to get this house it's causing me no end of worry (probably daftly!)

Thanks in advance for any advice :beer:

Thrugelmir

ReKo wrote: »

What I am very worried about is that the lender will do a last minute credit check once the deposit has been transfered to the solicitor and pull the plug on the whole thing.

If in severe doubt, pull out of the deal. As you'll be putting your entire deposit at risk.

Or stall on exchange and completion until there's certainty that the funds are available to fund the deposit.

There's a high probability that a credit check will be run prior to release of funds.

Alternatively speak to the lender. As if the funds are guaranteed to arrive. Then providing documentary evidence shouln't be an issue.

ReKo

Thrugelmir wrote: »

If in severe doubt, pull out of the deal. As you'll be putting your entire deposit at risk.

Or stall on exchange and completion until there's certainty that the funds are available to fund the deposit.

There's a high probability that a credit check will be run prior to release of funds.

Alternatively speak to the lender. As if the funds are guaranteed to arrive. Then providing documentary evidence shouln't be an issue.

Hi there,

Thanks for your reply.

I think you may have misunderstood my concern.

My concern is that after I send the deposit to the solicitor where lets say 50% of it is funded by credit card/s that they will credit check me again and discover that my 'affordability' has changed and retract their offer.

I have no problems in paying the repayments on the cards etc.
I don't think this is a scenario where the deposit is at risk, it's the mortgage and pulling out isn't an option. This isn't a situation I've put myself in lightly.

Thrugelmir

On exchange of contracts your deposit will paid over. If the lender subsequently pulls your offer. You will will be unable to complete, as won't have the funds to do so. Therefore defaulting on the contract and in the process losing your deposit.

Burridge60

ReKo wrote: »

....My concern is that after I send the deposit to the solicitor where lets say 50% of it is funded by credit card/s that they will credit check me again and discover that my 'affordability' has changed and retract their offer.
.

Your Solicitor will want evidence of where the deposit money is coming from if he has not already asked you.

Your mortgage offer may well include a condition requiring you to provide the balance of the purchase moneys without recourse to other borrowing so technically you will not be complying with the mortgage offer conditions.

If the Solicitor becomes aware that the money has come from Credit Cards he will be under a duty to report this to the lender (or may well seek their agreement to proceed to protect himself).

You are taking a huge risk in exchanging contracts using credit card funded money as the Lender will have every justification to pull the deal as you are not complying with the Offer.

If there is no concern about the payment of the credit card meeting affordability calculations with the lender it might be safer to have it agreed in advance. But they might pull the offer at that stage.

Lenders typically assume the cost of a credit card is 3% per month of the balance for affordability purposes.

ReKo

Burridge60 wrote: »

Your Solicitor will want evidence of where the deposit money is coming from if he has not already asked you.

Your mortgage offer may well include a condition requiring you to provide the balance of the purchase moneys without recourse to other borrowing so technically you will not be complying with the mortgage offer conditions.

If the Solicitor becomes aware that the money has come from Credit Cards he will be under a duty to report this to the lender (or may well seek their agreement to proceed to protect himself).

You are taking a huge risk in exchanging contracts using credit card funded money as the Lender will have every justification to pull the deal as you are not complying with the Offer.

If there is no concern about the payment of the credit card meeting affordability calculations with the lender it might be safer to have it agreed in advance. But they might pull the offer at that stage.

Lenders typically assume the cost of a credit card is 3% per month of the balance for affordability purposes.

Thanks Burridge.

What if a family member was to lend me the money for the deposit and then after completion I was to pay him back using credit cards?
Surely once completion is over and done with there is no more problems that could arise?
If the lender/solicitor wanted to know the source of the deposit couldn't it be noted as a gift?
The lender in particular has made me provide so many different forms and proofs of various different things that I'm sure the source of deposit would have come up prior to now if it was a large concern?

Burridge60

ReKo wrote: »

If the lender/solicitor wanted to know the source of the deposit couldn't it be noted as a gift?

Lender and Solicitor would require a letter from the person gifting the money stating that it is an outright gift, that requires no repayments either monthly or in the future and that they are not seeking to secure their gift against the property.

This would be kept on the file of the Solicitor to establish an audit trail of the money and on the lenders file and may require their authorisation too.

I am no tax expert but a "gift" in this way may well rank as a potentially exempt transfer for Inheritance Tax.

It can't be a Gift one minute and then a loan the next.

ReKo

Burridge60 wrote: »

Lender and Solicitor would require a letter from the person gifting the money stating that it is an outright gift, that requires no repayments either monthly or in the future and that they are not seeking to secure their gift against the property.

This would be kept on the file of the Solicitor to establish an audit trail of the money and on the lenders file and may require their authorisation too.

I am no tax expert but a "gift" in this way may well rank as a potentially exempt transfer for Inheritance Tax.

It can't be a Gift one minute and then a loan the next.

I've just spoken to my mortgage advisor about it and he said it shouldn't be a problem.
Reason being that I'm not applying for new credit cards to pay for it. They're existed credit and my affordability covers them widely anyway.
Also the credit file would take at least a month to update so it wouldn't show.

He said the lender doesn't do a second credit check and is double checking that.