Nationwide declined AIP

breakingbad

We applied for a £165k (75% LTV) mortgage on a house priced at £220k using the Help to Buy Equity loan scheme. Our parents have gifted the 5% deposit.

Our AIP was referred and went to head office underwriters with supporting documentation, but today it came back declined due to high levels of unsecured debt and they think we have been living too close to what is affordable.

In March I dipped into my (arranged) overdraft in order to clear a HP agreement before the interest free period ended (which I thought was sensible money management as overdraft fees were much less!) but apparently they didn't like that.

Out joint income is £74k, we have both been overpaying on our debt in order to bring it down. So yes our bank statements have looked very bare by the end of the month, but ONLY because we have been making large (£500+) overpayments voluntarily.

Our current debt levels stand at:
Credit Card (me) - £3870 (down from £5629 in May) - all 0%
Credit Card (wife) - £3190 (down from £3947 in May) - all 0%

Our broker is going to appeal, and has asked for copies of everything showing the overpayments etc.

I don't believe the level of debt is unmanageable. If we just made minimum payments, once all bills, rent etc are paid we are both left with over £1k every month!

What are your opinions? As well as appealing, broker is looking at other lenders. Can anyone recommend another lender who might be more sympathetic?

Thanks

ViolaLass

I imagine the bank is concerned that despite very healthy joint salary, you have been unable to save any money yourselves and, in fact, are in net debt.

Thrugelmir

garmcqui wrote: »

I don't believe the level of debt is unmanageable. If we just made minimum payments, once all bills, rent etc are paid we are both left with over £1k every month!

Not merely just a question of being unmanageable. Your credit history will reflect your attitude to money matters. Once you obtain the mortgage you could slip back into bad habits again.
The fact that you earn £74k and the entire deposit is gifted will be a major concern. Lenders like to see people showing the discpline to save.

breakingbad

Thanks for replies,

So should we stop overpaying on debts and start saving every month instead?

Both our credit files are faultless, never missed any payments etc etc

Thanks

Dave_Ham

This pretty much purely comes down to lender selection.

Nationwide are pretty ruthless on unsecured debt, this was not good lender selection in my opinion based purely on the unsecured debt alone.

Do not worry about what you are doing, keep overpaying debts down and just ensure your broker gets his/her next application correct.

breakingbad

Thanks Dave, that's slightly encouraging.

We don't want to lose the house we've chosen. Off the top of your head, which lenders are more lenient towards unsecured debt?

Thanks

Dave_Ham

That's a bridge to far I am afraid, I could say x lender and you may not qualify for 5 other different reasons.

I will say not Santander

breakingbad

Appreciate that, thanks.


It's just a bit gutting that our efforts to try and reduce our debt may be the very thing that prevents us owning a house anytime soon, feels like a bit of a kick in the teeth.

Thrugelmir

Focus on paying down your debts for a while. Your choice what you spend your money on. Same choice as everybody else has.

breakingbad

We really don't want to lose this house though Thrugelmir.

I am confident that we will be able to continue paying off our debts after the purchase, as the mortgage will be less that we pay in rent. So if saving some cash will increase our chances more than repaying debt, I would prefer to do so.

Thanks

ViolaLass

Others may be able to answer this - isn't saving v paying off debt rather a moot point since the lender will consider the overall position?