Overdraft effecting my mortgage application - growing worried

TheAllanCadenhead

Ok, so know one has replied to my previous post with any info whatsoever, probably everyones all busy paying off their mortgage lol.

I have recently been asked to write a letter to my bank about why I am regularly in my overdraft.

Figures: My overdraft is £2k. It was a student account overdraft but now it's a normal non-sutdent overdraft. I have been in this overdraft for 3 years now as I haven't been bothered to repay this (I know, you don't need to tell me, that's irresponsible). I've been living in my overdraft since I've had it, but I never go over the £2k limit, EVER. I am living within my means, but in my overdraft.

Only now I am saving £400-£500 a month out of my £1,000 p/m salary to pay this off as my fiance is kicking my !!!! because she is now out of her overdraft. I have always wanted to pay my overdraft off but instead I just live in my overdraft. It's not that I CAN'T pay off my overdraft, it's was just unnecessary because I didn't have any big commitments. The mortgage is now VERY important to us and so paying this off is now VERY NECESSARY.

The Mortgage is going to be with Leeds Building Society. Is this going to be a MAJOR problem? Will Leeds refuse my application and say something like "you've been in your overdraft for years, you're irresponsible"?. Also, if Leeds refuse my mortgage application, I've already paid £199 Lenders fee. Am I likely to get this back ?

All comments, good or bad, welcome. I am desperate for someone to reply as I'm getting worried. I have to write the letter tonight.

Thanks.:mad:

Taylor27

Overdrafts dont really affect ur chances dude, what could is any outstanding fees, possible miss payments of anythin, and whether u have a DEPOSIT, even 5 - 10 % of what u want to borrow will help, this is what most banks will look for before u are considered as they wish to know u are financially stable,

TheAllanCadenhead

Thanks @Taylor27! At least someone has kindly commented to give support :-)

I have already sent off proof of deposit, bank statements and p60's, utility bills and have received a letter from Leeds to say they are processing the mortgage. I have spoke to my Mortgage Brokers who have said they will forward my letters of explanation to them.

Like I say, I am living within my means but in my overdraft, it's been a quick few months so haven't had a chance to pull my finger out and pay off my OD but is easily do-able given a few months!

More comments/advice welcome though ;-)

Lokolo

Well you'll be stuffed if the bank withdraw the overdraft.....

Overdrafts are for short term borrowing and can be demanded back with immediate effect. So what's your plan if they do this?

TheAllanCadenhead

Hi @Lokolo.

I have thought about this. My plan as of last month, when we discussed the mortgage and upfront costs, was that I put away £500 a month. I already have £500 saved at the end of last month, plus another £500 as of the end of this month, and another £500 as of the end of next month. Bare in mind that all upfront costs for the mortgage will be split between me and my girlfriend, and I think there is only like £400 left between now and when the sale goes through.

In answer to your question, I don't know what i'd do. But between now and 4-5 months time I will be out of my overdraft, and when I get paid I still won't be in it. I just hope Leeds see the bigger picture. I've had various credit cards which are now paid off, along with various finances deals all paid off. The only thing I have over my head is this overdraft. Surely that should show that I am a sensible loyal payer that gets things all paid on time??

What do you think?

R_P_W

Its good that you have recognised that this is a problem you need to fix. Technically you are using it within the authoirsed levels, but like someone else said overdrafts are there for very short term borrowing.

Banks can withdraw the OD facility at any time and demand payment, but I would assume this is unlikely unless you start exceeding your limit or your circumstances change significantly.

Buying a property can be an enormous strain on your finances, I would say you always need more than you think especially when moving to a new place.

I guess you could look at it that if you had paid the overdraft off gradually over the past year then you would have had £500 a month to save ?

TheAllanCadenhead

@R P W, thanks for replying! Orgininally when I was out of university I did at one point decide to chunk down my OD by £500 a month, but never got round to it. Now I have stopped p1ssing my money up the wall and smoking and am now a converted devoted christian. Whilst I believe God will help me pay my overdraft and accept my mortgage, I know that is my own fault I am in this worrying mess and not in the know.

How I see it is, because I am going 50/50 on this mortgage with the other half (first time buyers) My share is only £550-£600 a month as it is shared ownership. This amount is including bills, mortgage repayment, part rent to the Gov and ultility bills; gas, lecky, water etc.

So out of my 1k a month salary wage I can put way £400 a month. But that's not taking into consideration I'm due a promotion anytime soon.

I know the banks assess the risk but surely the should also look at the positives? Unless 1 positive is the equivilant of 10 negatives?? If so then I am what they call Jimmy Saviled (screwed).

Any mortgage advisors around to comment?? lol.

sammyjammy

Its not clear cut that they won't care. Nationwide turned me down for being continuously in an overdraft of £500 with an LTV of 70%. It looks like you can't manage your finances but also depends on so much else. You won't get your £199 back if they turn you down.

R_P_W

Well if God is going to help you pay your mortgage and overdraft you have nothing to worry about!

JimmyTheWig

TheAllanCadenhead wrote: »

I have been in this overdraft for 3 years now as I haven't been bothered to repay this (I know, you don't need to tell me, that's irresponsible).

I think you've hit the nail on the head there.
You say yourself that you know you have been irresponsible.
The mortgage company will be able to see this. They may well take the same view as you and decide that you have been irresponsible.
Hopefully they'll also see that you are now paying it off. They should see that as you being responsible.

But even so...
Since the credit crunch began, there hasn't been as much money around to be lent out.
Lenders can pick and choose who they want to lend to.
Put yourself in the lender's shoes.
If they have the choice of lending to you (who they can see has been irresponsible in the past and is now being responsible) or someone else (who appears to have been responsible the whole time), if all else is equal they are going to lend to the other people and turn you down.

I think it will depend on many other factors, e.g. loan to value, salary multiples, the rest of your credit record, your girlfriend's credit record, time in current job, etc.
Living in your overdraft shouldn't be a deal-breaker.
But if due to everything else your application is borderline then it might be this that pushes it over the edge into the "no" pile.


The good news is that you are doing the right thing in paying it back. Not a lot else you can do now. Every month that goes by your overdraft will reduce. Once cleared, every month that goes by will be another month since you were living in your overdraft.

TheAllanCadenhead

sammyjammy wrote: »

Its not clear cut that they won't care. Nationwide turned me down for being continuously in an overdraft of £500 with an LTV of 70%. It looks like you can't manage your finances but also depends on so much else. You won't get your £199 back if they turn you down.

Thanks Sammy! My fiance is going to seriously kick my behind if this mortgage doesn't go through!

I always think if people say they have been rejected for having a £200 OD in the last year... what hope have I got if I've been in my £2k OD for 3 years!!

The £199 is the lenders fee. Because Leeds haven't "Lent" me any monies surely the can't keep this? If it was a processing fee then fair enough.

If anyone has a mortgage with Leeds Building Society if they come across this, please comment.

:mad: