affordability test tampered with

conleat

Hi every one, could I have your opinions on the following.
I applied to my Bank in 2007 for a buy to let mortgage, as I am self employed the bank used my profit and loss accounts to assess affordability, my net profits were £25k however this was not enough to leave a surplus for me to cover mortgage repayments when my other living costs were calculated in. the bank manager then used other amounts from my P/L accounts to inflate my salary, He used depreciation in motor vehicles £3k, bank interest payable £2k (interest that I still had to pay to the bank) and depreciation in fixtures in fittings £1k
I was not aware that this was going on as the affordability test was not carried out in my presence and have only recently learned of these facts.
should the bank manager have used these figures to enable me to pass the affordability test?
as a result of adding in these sums, my profit did not match that which HMRC would have been notified of.

GMS

BTL affordability will ultimately be based on the rental income.

Are you now in difficulty with the mortgage? Did you ask why the figures on the application form were different than those you submitted to the Inland Revenue?

What are you hoping to achieve?

conleat

thanks for reply.
Rental income was not enough to cover the repayments.
property has now been repossessed.
I have asked the Bank to explain why they used the above amounts to inflate my salary and the fact that as a result the figures did not match those submitted to inland revenue.
I am presently awaiting their response.
I hope to prove that this BTL was mis- sold on the grounds that if the affordability test had been carried out properly I would have failed it and therefore I would not have received an offer of the loan

Johnnytwostep

what happened to, oh I don't know, personal responsibility.

Always someone else's fault.

opinions4u

If they say "we shouldn't have lent to you" when they respond, what else are you expecting to happen?

Buy to let is a commercial investment on your part. If it went wrong, it's on you.

Rental income was not enough to cover the repayments

Genuine question. Why would you take it on then?

Morgage_Confused

was the BTL a repayment mortgage or interest only?
Normally BTL are interest only and I am surprised the rent diddnt even cover the interest payments?

antrobus

conleat wrote: »

..... the bank manager then used other amounts from my P/L accounts to inflate my salary, He used depreciation in motor vehicles £3k, bank interest payable £2k (interest that I still had to pay to the bank) and depreciation in fixtures in fittings £1k....

Otherwise known as EBITD - Earnings Before Interest, Tax and Depreciation, a very common measure of a business's financial performance. As far as I'm aware lenders are perfectly entitled to use EBITD to assess a business, there is no requirement for them to carry out the calculation in the presence of the prospective borrower, and neither does it matter that EBITD is not the same number as taxable HMRC profits. Which, in any case, would be something like EBD - Earnings Before Depreciation - and a quite different figure from the acccounting profit anyway.

Dave_Ham

This will go to 100 posts - you heard it here first.

OP completely bereft of responsibility with flagrant disregard for personal ownership and confident plenty on here that will be quick to offer opinion.

I'm out

Dave_the_Ginger_Cat

You can't blame someone else for poor judgement on your part

If the rental income was not enough to cover the payments why on earth would you take it on?

John1993_2

conleat wrote: »

thanks for reply.
Rental income was not enough to cover the repayments.
property has now been repossessed.
I have asked the Bank to explain why they used the above amounts to inflate my salary and the fact that as a result the figures did not match those submitted to inland revenue.
I am presently awaiting their response.
I hope to prove that this BTL was mis- sold on the grounds that if the affordability test had been carried out properly I would have failed it and therefore I would not have received an offer of the loan

As others will say, what do you expect to happen if by some strange twist of fate someone in authority does agree with you? You aren't in any position to agree that both parties be put back in the situation that you were before the deal was done, which is what you'd normally expect on a "bad" deal.

Brock_and_Roll

As Atrobus has pointed out, any banker worth his salt should add back in a non-cash item such as depreciation when looking to asset underlying profitability.