Would this constitute fraud????

tigertiger72

This is a little complicated.....we have found our dream house, but on "multiples" it is too expensive (>750K), although it is affordable according to my monthly sallary. We are trying to be creative to finance this, but I need to know whether this is bending things too far and constitutes fraud!! And if so, would it be found out???


Our present situation is that my wife has inherited a house in Germany. For sentimental reasons she is not ready to sell it. The other problem is that historically, house prices are very low and are only just starting to pick up following reunification. We would probably sell in 5-10 years, hopefully for twice the price it is now.

So what we are proposing is to take out the bulk of the mortgage against this property to partly finance our purchase in the uk (the fixed rate over there is APR5% so it makes sense). However to make the rest of the money up, we would also need to take out a mortgage in this country as well! The combination would cover the purchase price. The profits from the sale of the current house would be offset against the UK mortgage leaving approx 150K outstanding. As a result the payments are affordable (I am in a relatively well paid job).

So, is this extreme creativity or downright fraud....and would any checks by UK lenders show up the other mortgage?

thanks for advice

Mr_helpful

I dont think its fraud as long as you tell the lender here you have a self financing house in Germany. Its probably what I would do in your shoes.

wisbech_lad

Will you rent out the German house - and will that then be self financing?

toonfish

sounds like a sensible option to me.

Debt_Free_Chick

Some lenders look at affordability, rather than salary multiples e.g. Intelligent Finance (I think).

A whole of market mortgage broker might be useful, here

Emmzi

If you do not declare other debts when asked by a prospective lender, then self funding or not, it's fraud. It MAY have a material effect on their decision, so you are required to tell them.

tigertiger72

What we are doing is trying to raise equity from a house which is fully owned, standing there and doing nothing to partly fund a nice house here! We just do not want to sell it yet until the price improves!

We do not need to rent it out at present to cover the monthly payments. However if it would make a difference to any UK lender then we could do that...do you think that would be an absolute requirement? We would prefer not to as tenants in Germany have very strong rights including the right to make structural alterations :eek: :eek:

Just to go back to my original question - is there a system where mortgage companies are able to check on a Europe wide basis??

Thanks for the advice so far......

Emmzi

I'm not aware of any pan-european credit ref. agency, no.

I understand you may feel your desired course of action is moral, well intentioned, financially logical. I can't rest in good conscience telling you the best way to submit your fraudulent application, which you seem keen to do!!

I guess if wife borrowed money and gifted it to you..and you bought new house and took mortgage in own name only.. that may work. But if I were your wife I wouldn't be comfortable doing it.

Why not have a chat with a mortgage broker about your options? You don't have to apply for anything... but an honest conversation may reveal a specialist pan-european lender lurking out there somewhere who could help.

tigertiger72

Hi Emmzi,

You are right, we are keen to do this as it is the house of our dreams. And yes, it is financially logical, creative and well intentioned. But the moral basis is what is concerning me! That is why I am asking these questions ie is it creative (ie bending the rules!) or, rather, downright wrong morally, which would then be (justifiably) punishable! If it is frankly fraudalent we will not proceed (and I suspect that is the case, which is difficult when you know something is possible)!

I just need to find the best place to find such a broker. I understand people are not able to recommend a particular firm for promotional reasons, but are there any pointers as to where I could find such an advisor who might be help with an issue which is more complex than normal mortgage applications? I imagine simply googling would not be helpful...

Emmzi

To finalise the question...

I am a chartered banker with a qualification including "law of banking" to back up my opinion. (Not a banker any more, not boasting, but wanted you to have confidence in my opinion.)

Not declaring the German loan would be considered fraudlent.

Perhaps a pm to mortgagemamma might help find a specialist broker?

Barclays have also established a network of european brokers, primarily to assist with holiday homes, but they may well be able to help.

However most lenders will consider total lending against salary multiplier. What is the total you need to borrow, and what are salaries? That would let us give you an idea of if it might fly at all!

Also, if you did rent the german property, you could take a percentage of the rental as additional income on the multiplier. (Well, technically on buy to let, but..)

What do you think you'd get for it?

Debt_Free_Chick

I think TigerTiger needs to be clear about what he's intending to do. I can't see that he is intending to hide the German loan ... but it might be possible.

TigerTiger ... what is it about what you're doing that you think might be fraudulent? Having two mortgages in two different countries is not, in itself, fraudulent - provided you are 100% honest when you complete each application form.

If you are thinking of being less than 100% honest then, yes, that's probably fraudulent. If you are simply asking whether your proposal is "do-able", then the answer is probably "yes - provided you are 100% honest", but you may struggle to find a large pool of lenders who will offer what you want.

HTH