Will my over draft affect my mortgage application

Thrugelmir

JasonBrown83 wrote: »

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!

How will you pay the mortgage if your pay cheque doesn't arrive one month?

MrsHappy85

Ok, dont panic.

We applied for a mortgage last summer. We had a 10% deposit. Our mortgage worked out £200 a month more than our rent at the time. My overdraft limit was £1100, I was bring home £1300 a month, so clearing the overdraft each month but slowly going back into it. Husbands overdraft was £500.00. He is better with money than me and earns more so his overdraft only got used once in a while.

I was very concerned about my overdraft use. I also had a credit card with money owed and we both have car finances.

However, all our monthly commitments were met without problem, and we were saving £1000 a month. My overdraft was a bit of a habbit to be honest.

Long and short of it was - the mortgage broker advised me that as long as we were demonstrating good money management, not missing payments or applying for more finance we should be fine. We were. Our mortgage is with Halifax but we also offered one by the nationwide.

Obviously going into such a huge commitment such as a mortgage, being debt free would of been ideal but it wasnt possible for us. We needed to move and our dream house came up.

As long as you arent attempting to borrow the maximum amount, have a good credit history, and arent in debt to your eyeballs, I think you will be fine.

I would really really reccomend you use a broker, they know what they are doing and who to approach aswell as giving lots of valuable advice.

Goodluck x

JasonBrown83

MrsHappy85 wrote: »

Ok, dont panic.

We applied for a mortgage last summer. We had a 10% deposit. Our mortgage worked out £200 a month more than our rent at the time. My overdraft limit was £1100, I was bring home £1300 a month, so clearing the overdraft each month but slowly going back into it. Husbands overdraft was £500.00. He is better with money than me and earns more so his overdraft only got used once in a while.

I was very concerned about my overdraft use. I also had a credit card with money owed and we both have car finances.

However, all our monthly commitments were met without problem, and we were saving £1000 a month. My overdraft was a bit of a habbit to be honest.

Long and short of it was - the mortgage broker advised me that as long as we were demonstrating good money management, not missing payments or applying for more finance we should be fine. We were. Our mortgage is with Halifax but we also offered one by the nationwide.

Obviously going into such a huge commitment such as a mortgage, being debt free would of been ideal but it wasnt possible for us. We needed to move and our dream house came up.

As long as you arent attempting to borrow the maximum amount, have a good credit history, and arent in debt to your eyeballs, I think you will be fine.

I would really really reccomend you use a broker, they know what they are doing and who to approach aswell as giving lots of valuable advice.

Goodluck x

Thanks MrsHappy85 its really good to hear from someone who was in a similar position to mine. We have not missed any payments in years or applying for more finance. affordability wise the mortgage will only add £40 to out outgoing and with both our incomes we manage quite comfortably.

Macrae88

JasonBrown83 wrote: »

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.

If you've got a decision in principle already, then chances are they it'll go through OK, because as far as I'm aware the credit scoring is done at the DIP stage.

Some lenders do ask for bank statements, but usually just to check that salaries are being paid in etc.

JasonBrown83

A quick update, our MA told us yesterday (05/02/14) that our application has been passed onto the underwriter! I don't think I've been this nervous and stressed in a long time, I hope our application is not rejected for some reason.

ChopperST

Ours was rejected for using our first direct interest free overdrafts in the months leading up to the mortgage. The underwriter cited the use of the overdraft as showing we were living beyond our means. We appealed and sent in our various savings and investments statements showing that we had more than enough in surplus but it was a very stressful four weeks.

I'd take it as a lesson learned not to be in your overdraft prior to a mortgage application in the future.

sdl1503

Jason, I'm really interested in your outcome in this, so much so I've just joined this forum. Our circumstances are eerily the same. Myself and my husband have had an AIP for a 95% mortgage from Abbey (Santander) on a house we have also agreed a price of £173k on, with a 35 year mortgage. My husband is worried as the underwriters have requested 3 months worth of bank statements in which my husband was in his agreed overdraft, -£500, then -£300, and now in credit.
We've spoken with Halifax who we currently have a mortgage with and they said it would not be a problem with them as they look to the future not the past of your finances. Halifax will be our second choice if Abbey turn us down, however Abbey has a) a lower % rate, b) no arrangement fee and c) contribution towards the survey. Halifax will cost us £20 a month extra on the mortgage, £995 arrangement fee and full cost of survey at £540.
I hope you get approved, and would appreciate it if you let us know when you hear back.

Wozza85

I regularly use my OD but my salary each month gets me out of it. Just a habit like you. I am however going to pay off my overdraft fully end of this month and end it to help with application to Santander also. They have asked for 3 months slips and statements so I will pay off overdraft and then show them the latest statement showing that. My broker said that would be favourable.

sdl1503

Wozza85, that's what my husband has done, all paid off. Will let you know when we have heard back.

PheoUK

I'm also applying to Abbey/Santander at the moment, I know how you feel, its horrible waiting at the moment, worrying about this kind of thing.

Personally, I only drop into overdraft temporarily when I've forgotten to move money I've set aside for bills into my current account. This is normally rectified within a couple of days.

They get the valuation next week, hope it all comes back OK!! Fingers crossed for us both, try not to stress too much!