Use of interest free overdraft affect on mortgage

ChopperST

We are currently in the process of applying for a mortgage for our new home. We had an AIP with the Skipton however the underwriter has declined it due to my use of my First Direct interest free overdraft.

As we have been saving like crazy I have used the overdraft up to £150 / £200. He has declined our application on that basis feeling we don't live within our means. We both are in full time employment and have no bad debt we both also have a capital one and AMEX platinum card which are purely used for cashback and cleared in full every month. With equity and savings we have £50,000 and are looking at borrowing at 85% LTV. In the months leading up to the application between myself and my wife we have been saving between £2 and 2.5k a month.

Our mortgage adviser told me it wouldn't be an issue as I even pointed out to him at the time as it was within our agreed overdraft facility anyway. How wrong he was. Perhaps a little naive of me to have used it for the sake of an extra £200 in savings but was obviously looking at saving every penny we could.

We have lodged an appeal but would appreciate any advice from any of the resident mortgage advisers on here. Certainly worth bearing in mind for any other forum members who use the First Direct facility as "free money" as it may have cost us dear.

ChopperST

Anyone any advice at all? Potentially considering another application with another lender.

Dave_the_Ginger_Cat

I do not work for FD, but have been in this industry a number of years

I find it unlikley that use of an approved overdraft is the sole reason for decline, particularly where it's less than £200. I'd suggest you find out a little more, and I might recommend you get a copy of your credit file

ChopperST

Dave_the_Ginger_Cat wrote: »

I do not work for FD, but have been in this industry a number of years

I find it unlikley that use of an approved overdraft is the sole reason for decline, particularly where it's less than £200. I'd suggest you find out a little more, and I might recommend you get a copy of your credit file

My wife works in senior management for one of the credit reference agencies so we are well versed in checking files and everything is fine. We passed credit checks no problems as the underwriter fed back directly to my MA his reason for declining.

He did raise another point. Our current home is my first home from being a single man and as such the mortgage is only £200p/m. The product we have applied for will be £1000p/m. He was concerned as to the increase in mortgage borrowing. Well my current house is a 2 bed terrace in a not so nice area of Bradford. The new home is a 4 bed detached in parkland in a nice area of Leeds within the catchment area of good schools. Our combined income a month is £5000 and my wife brings home a £7k a year bonus and I myself earn between £3-7k in self employment on top of my employed earnings. So we have budgeted 25% of our income towards the mortgage which apparently fell well within the Skipton's affordability calculator and could have potentially applied for a mortgage of £80k more than we have asked to borrow.

We have appealed the decision and explained all these circumstances and the underwriter has agreed to relook at the files. We have also sent him all of our pension, investment and savings statements as he raised the question as to why our current account balances were so low, which I find bizarre to be honest, surely they must appreciate anyone buying a house will have all their money in savings. Also our bank statements show payments to Fidelity, H&L and Santander savings accounts.

We personally believe our application has not been thoroughly looked at.

Dave_the_Ginger_Cat

I tend to agree - if it has been looked properly then the comments are thin that they have given you. If it hasn't, then you seem to have a second opportunity.

I can see how a link could be constructed between apparently low current account balances and being able to show that an increased monthly payment is sustainable. It sounds like you have sent them a sensible rationale with evidence. When I completed my last mortgage, every last penny was out of current account to gain the most interest I could before completion.

Good luck - there are no guarantees with these things, and I hope you get the outcome you are looking for

ChopperST

Thanks for taking the time to reply. We have been told we will have a decision tomorrow afternoon.

Again it seems that those of us who save and work hard are being punished for the 125% LTV's and people borrowing more than they can afford, I strikes of an underwriter looking at the cold black and white rather than asking the question as to why someone with an income of £45k a year has 0 or minus balance in their current account.

What compounds it further is that we've sold our current home, if this mortgage doesn't go through then the chain collapses.

I've just relooked at my bank statements. The reason for using my O/D last month was due to the £700 in arrangement and set up fees they have took BEFORE approving my mortgage - a bit rich don't you think?

carslet

i had a mortgage referred because of credit card balances when the broker told me this would not be an issue

ChopperST

I'm starting to think my broker has put the application in, more with his commission in mind than our interests to be honest. We are buying a new David Wilson home and have spoken to their brokers and have decided to let them look for an alternative product for us. I have told them about my use of overdraft and the issues raised by Skipton and they don't see it as an issue but this whole process has shook my confidence in the broker system to be honest.

carslet

ChopperST wrote: »

I'm starting to think my broker has put the application in, more with his commission in mind than our interests to be honest.

I am sure mine did the same

ChopperST

He's also already took his fee so if this falls through I'm £80 short of a grand out of pocket.

Thrugelmir

ChopperST wrote: »

We passed credit checks no problems as the underwriter fed back directly to my MA his reason for declining.

Unusual for an underwriter to comment in detail. Hard to believe it's the overdraft usage alone either.

Perhaps its has something to do with your base income in relation to the mortgage, i.e. strip out bonus & self employed earnings.