First time buyer living in my overdraft - help!

SuperScary

Hi,

I'm a first time buyer about to apply for a mortgage and I'm worried my history of using my current account overdraft will cause problems.

I'm looking for a £175k mortgage. I have a £75k deposit, 7+ years working at the same company, now on a £42k salary.I'm applying for the mortgage alone.

An Experian check 4 years ago came back as fine (annoyingly can't recall score) with the only minor issue being a !!!!-up by mobile phone company Vodafone incorrectly saying I'd missed the very first payment on a new contract with them which wasn't true (it was direct debit and they took the monthly fee as expected, no idea what this was about).

My main concern is my long term habit of "living" in my overdraft. By this I mean I would get my salary and be in credit, then slowly enter the (£1500k) overdraft until by the end of the month I was about £1000 into the overdraft. Then the salary came in, and back into credit, and repeat. I never exceeded the agreed overdraft.

A stupid practice I could have ended at any time by paying some of my savings into this current account, but I never thought about it and used it as a convenience rather than out of necessity.

However, I guess a mortgage lender will see things differently and now I'm terrified they will look at this and deny me a mortgage. I had planned on going with Nationwide.

Any advice? Am I totally screwed? Are Nationwide a hard lender to please or am I over-worrying? I had hoped the deposit would help smooth things over.

I guess I'm asking for any advice, this has me up at nights not sleeping.

Thanks,

M

ACG

It should be fine in the main, but run it by them before making an application.

Thrugelmir

Lender won't know you had savings at the time.

SuperScary

Thanks for all your replies.

As of right now, I'm not in my overdraft (about £2k in credit). Would it make any difference if I have the agreed overdraft removed by the bank today? Or will this not matter to the mortgage lender?

Also, the primary reason for my frequenting the overdraft has been a standing order taking money I've just been paid (salary) and putting it into my savings account with Nationwide at the beginning of the month. I'm also planning on apply with Nationwide, would this have any bearing?

From time to time if I thought the overdraft was getting too much (above say £500) I'd take some money from the Nationwide savings account and put it back into the current account to quell the overdraft.

Nationwide should be able to see I've had more than the total overdraft facility (£1500) saved away for at least the last 6 years, but I've no idea how they look at things and maybe this is irrelevant and they'll just fixate on the overdraft?

I have a mortgage in principal with Halifax, just had an offer accepted on a place and am meant to be applying for the full mortgage (likely with Nationwide) on Monday.

The forums with similar overdraft posts all mention 'letting the lender / underwriters know before applying' . I'm using a mortgage advisor (not Nationwide, with an estate agent but recommended) so what should I tell him, other than all these details of course?

Should I compose a letter explaining why I frequented the overdraft (which boils down to 'I didn't need to, I didn't realise it would be an issue')?

Any words appreciated,

Thanks again.

BelleBot

I used to live in 2 overdrafts, one is now totally cleared and the other I'm still in by about £1500 (0% interest). I even bounced over the agreed limit a few times (rectified within 24 hours). My first mortgage application came back with no problems at all. I'm now on my second (different house) and I'm hoping the same will be true. Both applications have been with Nationwide. Hope that helps.

I think as long as you stay within an agreed overdraft and don't go over you'll be fine. It's worth letting them know though.

SuperScary

Hi BelleBot,

thanks for your message, it gives me some hope. Unfortunately I've been going through me current account statements and managed to find 3 instances (2008, 2009, 2010) where I bounced past the agreed overdraft limit. These were rectified as soon as I realised, which was within (2 days, 5 days!! and 1 day).

I'm now anticipating being turned down because of this. The killer is I never needed the overdrafts and the bank simply left it there and so high from my student days.

Feeling stupid and frankly, a little bit sick.

If it's any consolation, since Jan 2011 my current account looks much better and has never gone more than £500 into the £1500 overdraft, but I doubt that'll count for much.

Thrugelmir

SuperScary wrote: »

Should I compose a letter explaining why I frequented the overdraft (which boils down to 'I didn't need to, I didn't realise it would be an issue')?

Lenders will make their own decision based on all the facts.

SuperScary

Thanks for the comment Thrugelmir.

I think based on the 3 times exceeding the overdraft I'm pretty much screwed now. Ironically, I really am a safe bet for lending. Now I have the deposit I was aiming for, the stand order is stopped and my current account is going to be massively in credit each month and rising going forward, I'll shut the overdraft facility but all too little too late.

If only I'd realised overdrafts were important years ago, I'd now be close to a shoe-in as opposed to close to zero chance.

I guess if i'm turned down I'll just have to forget about home ownership for a year, waste on rent and hope the prices don't continue to rocket (some hope).

I don't suppose shutting the overdraft facility today will have any impact? Not even sure I could get it done before Monday, but maybe the fact it's not even an option would have a bearing? Probably not.

Man I've screwed up.

Thrugelmir

Where's the deposit coming from? If it's money you've saved then this is a major plus.

If only I'd realised overdrafts were important years ago, I'd now be close to a shoe-in as opposed to close to zero chance.

The world has moved on. Technology has transformed the ability to assess and price risk. Shared data between so many parties enables an accurate picture of an applicant to be built.

SuperScary

Thanks all for your comments, I'm feeling it's about 50/50 and there is some hope!

getmore4less

Keep saving just do it a month(or 2) behind the income

Ie. save just after being paid with anything left from the previous month 1x buffer or have a 2x buffer or something in between.