Mortgage Application declined

ripleybn3

Hi

This is my first post to this forum and was wonderin whether you could shed some light into this situation.

Back in November we applied to our bank First Direct for a fixed rate mortgage as our current fixed rate was due to expire at beginning of March. The fixed rate offered by First Direct was 2.99% for two years which is nearly half what we are currently paying nearly 5.75%. We paid our deposit and but took our time filling the application as we had to send alot of documents and I am self -employed. A couple of days ago we got a phone call saying that our application had been declined as my limited company accounts show a loss. In the accounts included a salary for myself and some dividends. I had also enclosed my business bank statements which show drawings. My husband is employed and told them that he could afford the mortgage on his salary alone. I also had extra income of £500 a month from another source which I could prove on the bank statements. It's ridiculous how they calculated our affordibility when this new rate would have meant we would be paying half amount of the mortgage repayments as before. We bank with First Direct and they can see the mortgage amounts going out plus our income coming in. Our LTV amount is 27%

Do you think we were declined because the offer at the time was 2.99 and interest rates are going up therefore they have taken back this offer and using my business accounts as an excuse?

Do I have grounds to complain?

DFisherIFA

Hi
I would suggest that you were declined due to the loss made by the company. As a Company director, regardless of whether you are receiving salary & divs you are still responsible for the losses that the company make.
Lenders are generally taking a dim view of losses and declining profits at the moment. First Direct are also not the most flexible of lenders.
I would suggest that you should seek some professional advice from an IFA who will find a mortgage for you based on a 'whole of market' approach rather than one lenders limited viewpoint.
I hope that helps

JIMJFK

Hi

I'm watching the forum for long time but i never posted before.

I would like to share as well my experience with FD.

I recently opened a current account with FD mainly for the offset mortgage (and not so much for the 100 pound incentive). I'm looking to buy a property. I called them to get an AIP, since my last one from my main bank account (Halifax) is expired now. Following the procedure on the phone i first got declined for an offset mortgage (to my surprise) since they said that i don't fullfil the salary criteria (sole application). Then i got declined for a tracker one as well. All this to me wouldn't be curious but i have to enclose the most important information to see why they do it according to my opinion.

I wanted to FULLY OFFSET the mortgage since i have the cash for it!

That means that this bank looks to lend to people who willl give them a BIG profit.

During the application i told them that i wanted to fully offset it. Due to my calculations the tracker one might also be appropriate in my case since i hope the same trend will follow the savings accounts to any change of the BOE base rate

johnRogers

Yup - same thing just happened to me I was applying as a joint applicant looking for a mortgage that is just about 3.5 times our joint salary. (58% LTV)
However I am a company director and 3 years ago we made a 2 grand loss (~20k profit for the other two years) - because of this they cannot count any of my income for their calculations - nor can they consider that I pay for any of our fixed outgoings like childcare ( even though i do )

Basically they are a small super conservative lender offering great rates so it's their call but it does mean if you are a director and your company has made a loss in the last 3 years for whatever reason - don't bother applying!