Hire purchase on conditions of mortgage?

barbs706

Hi, I'm in the process in buying my first house. I have received my mortgage offer from the Woolwich and as I was looking through all of the points on the pages, I came across a section that worried me:

"You must repay the following commitment in full within 30 days of completion of this mortgage without taking on further borrowing:
Hire Purchase £8,103.00"

Are they asking for this amount within 30 days after I start my mortgage or in 25 years time when I have completed the mortgage? Also, why do they want this large amount of money off me? I put down £16,000 deposit leaving me with a mortgage of £64,000.

I went into my local barclays branch and they told me I need to speak to my solicitor and she will tell me when its due.

The only thing that I can remotely think of that could be to do with this, is my car that is on hire purchase for 2 more years. But, when I had my meeting with my mortgage adviser in the beginning, she didnt mention anything about having to pay my car off within 30 days of starting a mortgage.

Any help is greatly appreciated!

holly_hobby

They want the HP paid off within 30 days of drawdown (completion) - this is a condition of the mge offer/terms (a decision based either on affordability issues or your debt exposure).

They have also made clear that they don't want the noted HP to be repaid by increasing debt (i.e using a credit card/rolling debt arrangement for its repayment) nor by effecting a new credit agreement (i.e taking a new loan to redeem the noted HP).

They MAY ask for the solicitor to confirm this has occured, they may check with CRAs this has taken place, they may do neither. And if it later transpires that the HP was not repaid as required - they may cite you as being in breach of mge terms.

First thing to do is have your mge broker get this clarified with the lender i.e establish why this condition has been imposed, and if the terms may be varied.

Hope this helps

Holly

barbs706

By completion, do you mean when we exchange contracts, or at the end of the 25 years of my mortgage?
Why didnt my mortgage advisor tell me about this at the start? I wont be able to pay off my car in one lump sum, I dont have that kind of money.
I have paid my soliciter and I am going there tomorrow to supposidly sign the contracts over. Have I just wasted £900 on soliciters bills, and 7 weeks of my life!
:mad:

KingElvis

Looks to me like that want you to pay off your banger as a condition of your mortgage. I would imagine that they think you owe too much.

It's strange that your brief hasn't brought this to your attention.

hcb42

seems a bit harsh, depends on your earnings I guess.

ring them tomorrow ASAP

vacheron

They mean from the commencement of your mortgage.

There was a similar discussion here:
https://forums.moneysavingexpert.com/discussion/2334821
which I only remembered because we had a similar clause in our Barclays paperwork too. I also remember a post stating that it was part of their standard conditions and they couldn't remove it now even if they wanted to! (perhaps someone else can find that post?)

Personally, we didn't hear from them again once the mortgage was completed.

It seems to be a due diligence/back covering exercise which absolves them of responsibility if you don't comply with their request and then subsequently find yourself with affordability problems.

barbs706

When I went down there 6 weeks ago, they couldn't give me a mortgage fast enough. It will all pre-approved and all I had to give them was 1 wage slip.
They have not taken into account either that I can give my car back in two years time and walk away. I would of only paid £4,000 off. So technically I don't even owe that much anyway.
The thing what really annoys me is that the lady in barclays worked the mortgage around my car! She put me onto a 2 year fixed rate because she said in 2 years time you could be £179 better off, from what you were paying for your car.
Anyway I guess I will have to pop down there tomorrow before I go see the solicitors. No point signing contracts when I cant even get the money!

barbs706

Vacheron, so did you have outstanding debts that they asked to be paid off in full? And you never heard from them even though you never paid them off?
That does all sound a bit more promising. I would of thought my mortgage advisor would have told me about it if it was a necessary, other than an old condition that they use to cover their self if I say missed a payment etc.

Senior_Paper_Monitor

.......

the lady in barclays worked the mortgage around my car!

my mortgage advisor would have told me about it if it was a necessary

...... who advised you on the application ?

barbs706

I did not use an independent mortgage advisor or broker, I went directly to Barclays.
A lady called Christine from the Lowestoft branch done my first quote. She never mentioned anything about it, and she knew about the hire purchase because she was the one who said we will work the mortgage around your car. Then a lady in the Great Yarmouth branch called Emma finished it all off for me because Christine was on holiday. She done me another quote because the rates had changed for something, and she never said anything about the hire purchase issue.
Some "Advisor" hey.

holly_hobby

barbs706 wrote: »

By completion, do you mean when we exchange contracts,

No, completion is when the funds are drawn down i,e you get the keys to your new home (I am assuming this is a purchase)

barbs706 wrote: »

or at the end of the 25 years of my mortgage?

That is termed as redemption i.e the closing of a mortgage account

barbs706 wrote: »

Why didnt my mortgage advisor tell me about this at the start? I wont be able to pay off my car in one lump sum, I dont have that kind of money.

I was going to say maybe the lender had not communicated this to them, but you say you went direct to the bank.

If could be that the processing team did not communicate the terms of the offer, to the in house adviser before releasing.

barbs706 wrote: »

I have paid my soliciter and I am going there tomorrow to supposidly sign the contracts over. Have I just wasted £900 on soliciters bills, and 7 weeks of my life!
:mad:

I am not sure what fees you have paid your solicitor, as the legal fees generally only start once the offer has been received. In that the solicitor should only request required searches once a mge offer is in place. Unless there have been other items of expenditure involved such as transfer of equity, trusts, etc ...

As I said earlier, you need to establish why this condition has been placed on the mge, its terms and if those terms may be amended.

If the lender refuses to amend, and you can not satisfy the requirements, you may need to source the help of a whole of market broker, whom will aim to locate lenders happy to accomodate your HP arrangement in their affordability calculations.

If you do decide to change lender, you may lose any product fees already paid, such as product reservation fee.

But you may be able to use the survey with a new lender (if the surveyor is on their panel) - which would possibly save you another survey fee (although there may be an admin fee for this facility).

(it is true that in circumstances such as this, quite often lenders don't actually check or request proof that the finance has been redeemed. But if you do complete, and they do check - you will find yourself in one hell of a sticky hole, whereby the lender may recall the mge for breach of mge terms. Which to you, would mean an immediate need to remortgage to find a new lender to take over the borrowing. I personally wouldn't like to take the chance, as even if you were happy to take this chance, a property has to be owned for 6 mths prior to any remortgage/futher lending).

So first things first - Monday am phone the adviser and ask them to clarify why the condition and if there is any way to amend or ask for flexibility. This will give you the bigger picture, on if you need to start looking for a new broker & mge lender.

Hope this helps

Holly