Will my over draft affect my mortgage application

JasonBrown83

Hi all I wonder if the community could give me some advice.

On Saturday we are meeting with our IFA to complete a mortgage application with the Abby, but Im a bit worried about what impact my overdraft will have one the application.

We already have a Decision in Principe for 175k, we made an offer on a house for 173k and it was accepted so our mortgage will be reduced to £164,350 over 35 years.

Im a bit worried about the impact my £1500 agreed overdraft will have on the full application though, I have a good credit score of 430 (via Equifax) by OH also has a good score, but Im really worried that we will be turned down as we love the house we've found.

Affordability wise the mortgage repayments are slightly more than our rent £826 as opposed to £775, so making the repayment would not be a problem.

The overdraft if interest free as it is a hangover from when I was a student (they never converted it when I graduated).

How does Abby / Santander treat overdrafts when someone is applying for a mortgage with them? Will it negatively affect us?

Please help as I could really do with some reassurance.

Thanks in advance.

kingstreet

This is an unused overdraft facility, or you are overdrawn £1,500?

JasonBrown83

I us the facility each month. my salary gets paid into the account, the amount needed for rent and bills is transferred the the joint account and whats left is used for day to day spending.

ACG

Do you use it fully?
Do you clear it each month when you get paid or are you still in it even after pay day?

JasonBrown83

When I get paid I am still in the OD by £200

Let_Us_See

So every single entry on your bank staement shows as overdrawn? A lender usually has no issue with use of an agreed overdraft, but being constantly overdrawn (even on pay day) may be an issue. Get your adviser to call Abbey prior to any submission.

Thrugelmir

Repay the debt from savings. Then operate the account in credit. Will make life far simpler.

ACG

In the eyes of a lender its like your relying on borrowed money.

I have never had to run anything like this by a lender so im not entirely sure how they would view it, but living in an overdraft AND payments going up... i would certainly be speaking to the underwriters before making an application as i would not be 100% on this.

bluep

We both used our agreed overdrafts frequently but were able to demonstrate that a) our wages when paid in took the account back into credit (so only overdrawn for half the month and b) that we had more than enough savings to be able to pay back the OD immediately - then it didn;t seem to be an issue. I got the impression that the lenders I was talking to see it as indicative of your overall financial situation so if you are using a lot of available credit up out of necessity then that's different from having pots of cash elsewhere and chosing to use your OD.

JasonBrown83

Now I'm really worried how can I repay the overdraft with my savings when all my savings are for the deposit and legal fees!

ACG

Before you incur any (more) costs, speak to the lender/underwriter.

It might go through, it might not but the sooner you know the sooner you can plan for it.

If you cleared your overdraft how long would it take you to save up the rest? If its a month, could you not just set a completion date a month down the line?