Overdraft effecting my mortgage application - growing worried

TheAllanCadenhead

JimmyTheWig wrote: »

You may have mis-understood how LTV works.

Before I read on.. i've seen this abbriviation everywhere. What does LTV mean? something To Value? Loan To Value? Is that right?

TheAllanCadenhead

JimmyTheWig wrote: »

Forget about the shared ownership. Lets just look at the bit that you are buying.
You are buying something for £30,000 (25% of £120k).
So in theory the building society will lend you £27,000 (90% of £30,000). So you would need to put in £3,000, which you have.
But the value of what you are buying is £27,500 (25% of £110k).
So in reality the building society will only lend you £24,750 (90% of £27,500).
But if you are still buying it for £30,000 then you will need to put in £5,250. Of which you only have £3,000. So you are £2,250 short.

.

I get this bit. But what we are doing is trying to get the sellers to sell for £110k. That way we can go back to Leeds BS and ask them for the lower mortgage amount, which would be £24,750. So this way, technically, we would have paid MORE deposit than we have to?? if that makes sense. Because it's a small loan, hopefully they will approve.


Going back to the main point in this thead, I need to write a letter explaining why I am always in my overdraft. So I am going to write something like "It was a student account whilst I was at uni my rent was high so I had to use my overdraft. I am now paying this off at a rate of XX.XXamount each month until it is fully paid off on XX-XX-XX date. With this mortgage I will be more financially responsable than I already have been and I am fully aware of the consequences of missed mortgage payment deadlines etc."

Would that be enough to convince them (as well as my good credit history, my job security, my girlfriends wage salary etc) enough to seal the deal?

JimmyTheWig

TheAllanCadenhead wrote: »

Before I read on.. i've seen this abbriviation everywhere. What does LTV mean? something To Value? Loan To Value? Is that right?

Loan to Value. Correct.
It's the opposite to deposit, in effect.
E.g.
Purchase price: £30,000.
Value: £30,000.
Deposit: £3,000.
Loan: £27,000.
Loan to Value: £27,000 / £30,000 = 0.90 = 90%

You would then be entitled to a "90% mortgage" or a "95% mortgage" but not an "80% mortgage".

JimmyTheWig

TheAllanCadenhead wrote: »

I get this bit. But what we are doing is trying to get the sellers to sell for £110k. That way we can go back to Leeds BS and ask them for the lower mortgage amount, which would be £24,750. So this way, technically, we would have paid MORE deposit than we have to?? if that makes sense.

Correct. That would be fine as borrowing £24,750 on a value of £27,500 would be 90%. And you'd have £250 of your deposit left in your back pocket.
Or you could decide to borrow £24,500 (using all of your deposit) and your repayments (or term) could be reduced.

So if you can get them to agree to £110k that would be perfect. If you can't the mortgage isn't going to work as it stands.

Going back to the main point in this thead, I need to write a letter explaining why I am always in my overdraft. So I am going to write something like "It was a student account whilst I was at uni my rent was high so I had to use my overdraft. I am now paying this off at a rate of XX.XXamount each month until it is fully paid off on XX-XX-XX date. With this mortgage I will be more financially responsable than I already have been and I am fully aware of the consequences of missed mortgage payment deadlines etc."

Personally I wouldn't bring the mortgage (particularly the idea of missed mortgage payment deadlines) into it.
Don't know if they want an answer to why you haven't cleared it yet.
Haven't had to write one of these before and haven't seen anyone else's, but I think I'd be tempted to leave in the bit about being a student (I like that - a student with an overdraft is perfectly normal) and about paying it off (I think that is important) but inbetween say something like "It was only recently that I realised that I didn't want this debt hanging over me, which is why I am now paying...".

What do others think?

Would that be enough to convince them (as well as my good credit history, my job security, my girlfriends wage salary etc) enough to seal the deal?

Unless I'm missing something I think you'll be absolutely fine. From an affordability point of view it should go through on your girlfriend's salary alone so I can't see a non-increasing overdraft causing a problem.


Can you confirm if you are using a broker or have had any other advice on this loan?

TheAllanCadenhead

I found the property through Ward & Partners estate agency, who then give you a mortgage advisor. He refers you to a company called Mortgage Matters who help liase between the BS and solicitors etc. The mortgage advisor at Ward & Partners was the one who analysed our details, what we wanted and how we wanted it, and suggested the best Mortgage lender, which happened to be Leeds BS.

The mortgage advisor has said it shouldn't be a problem, they might look into the overdraft situation but from his stand point he can't see why it should be a problem as I never go over and I pay it back all the time every payday.

I will definately put in the letter that I am a student. I will then have to forward a draft to my mortgage advisor who will then adapt and change it so it gets the best points accross.

Leeds BS have only said "Please explain why you are in your overdraft". They haven't mentioned anything about 'why haven't you paid it off' (not sure if i should have that in there or not) or 'Will I be looking to pay it off?'. The answer to this is obviously "yes".

Any further ideas on what to put in the letter?

Thanks so much @JimmyTheWig. I'm at work at the moment and this is the only website I can go on. And it has taken the stress off my mind.

Bare in mind it's not just the stress of getting the mortgage, it's the stress of hoping the sellers will reduce the price because we are definatley not going ahead with it if they still stick to £120k. I am also moving jobs (same money £14k a year) to the location where I am moving. I even sold my car to get money for the deposit, because when i get the new job It will be 2min walk from the property I am buying. So if the sellers don't reduce their price, If I don't get the mortgage it's going to create hell.

Thanks for the support with everything and the encourraging words. I'm 25 years old and it means a lot! lol

TheAllanCadenhead

Any further information would be great!

Especially from any mortgage advisors or people who have a mortgage with Leeds Building Society.

kingstreet

If this is shared ownership, the vendor is unlikely to be able to reduce the price. Their hands my be tied by the HA.

TheAllanCadenhead

kingstreet wrote: »

If this is shared ownership, the vendor is unlikely to be able to reduce the price. Their hands my be tied by the HA.

If this is the case I'm confused as to why the valuation is saying the property is valued at £110K but they sellers are selling for £120k???

You would be stupid to buy a car for £2k, knowing full well experts have said it's only worth £1k. It's the same for a property. Isn't it?

Any idea??

kingstreet

Yes. The vendor will need to put the valuers's report to the HA to see if they are prepared to accept a lower valuation.

The HA normally has a valuation done before listing the property, so they may not be too impressed with a downvaluation, unless there's something wrong wit the property they knew nothing about.

Is it a market downvaluation, or are there essential repairs needed?

You would be stupid to buy a car for £2k, knowing full well experts have said it's only worth £1k. It's the same for a property. Isn't it?

Quite. So you won't buy at the higher price and the vendor may not be able to sell at the lower price. Hence, a stalemate and you're left looking for another property.

TheAllanCadenhead

kingstreet wrote: »

Is it a market downvaluation, or are there essential repairs needed?

Quite. So you won't buy at the higher price and the vendor may not be able to sell at the lower price. Hence, a stalemate and you're left looking for another property.

This is a valuation which was done for Leeds Building Society in order for us to get the mortgage. There is absolutely nothing wrong with the place and it's a really nice place. It's just your mandatory valuation, but when the report came through in the post iit stated the Sellers Price: £120,000 but also said Property Valued at: £110,000.

Nothing was said by anyone until I spoke to my mortgage advisor who said they will put that to Leeds to see what they make of it, and also speak to the sellers to see if they will lower the price.

If they don't lower it, we are definately not buying it. Simple as that. The good thing is, that we are very interested in this property and it has been on the market for more than 6 months. I do not know if this is a common problem which is why it has been on the market so long.

Is that any help