Baffling decision from Clydesdale Bank - any ideas on appealing?

swanseaboy

I applied for a BTL remortgage with Clydesdale, 70% LTV on a house valued at £360K (by Clydesdale's valuers), with tenants currently paying £1650 per month. I went for a 5 year fix at 4.19%, so repayments of approx £870 pcm (interest only) vs. rental of £1650, i.e. income is 189% of repayments.

I provided proof that the property contained tenants as part of my application, together with all the figures, and the tenants showed the valuer round. The tenants are in full-time employment locally, and have been resident for over 2 years.

Clydesdale have now turned us down as they class the property as a "second home". (We live nearby, with current mortgage payments of £300 pcm). As such our income (excluding any rent) has to cover both mortgages, and they say we fail on that front.

My broker spoke to his local Clydesdale account manager, who agrees that a mistake has been made, but neither is having any joy in speaking to anybody at the bank with the 'clout' to review the decision.

Question is - how can I appeal against this decision, as a mistake has obviously been made somewhere? I asked Clydesdale their definition of a second home, and was told "somewhere you intend to live for part of the time. You must not rent out this property - if you do then we will require you to convert your loan to a BTL product".

Any advice on options would be appreciated - if nothing else there is a £1999 product fee at stake.

Many thanks.

ACG

Your broker would speak to his bdm and his bdm would resolve it.

If the bdm can not resolve it then I think your going to struggle.

That being said, your mortgage is £300 a month and the mortgage on the btl is £800+... why? Is the BTL worth more than your resi?

Thrugelmir

You make no mention of your household income. What happens if the property is empty and/or interest rates rise to 8%?

swanseaboy

@ACG: thanks - we'll continue to push the broker & bdm in that case, and see if we can get any joy via that route.

The reason our resi mortgage is so much lower is because the capital amount is only £82K, and we're fortunate to pay base rate + 0.18% (the interest element is only £46.50 pm, but we are choosing to pay off capital as well).

@Thrugelmir: without wishing to sound rude, our household income is more than enough. The tenants will be in the property for at least 8 more months (they are on a corporate relocation), so by the next void we will already have a buffer of about 5 months' payment if needed (we already have a decent fund for repair, redecoration etc. when the time comes, and don't treat the btl as an monthly income source). We also have a fair amount in ISAs etc. (and have provided proof of that), if needed.

One of the reasons we have opted for a 5 year fixed rate is to minimise the risk on that side. I took out my first mortgage when rates were touching 10%, so have always erred on the side of caution.

dj1471

Thrugelmir wrote: »

You make no mention of your household income. What happens if the property is empty and/or interest rates rise to 8%?

Lenders aren't required to do a stress test on 5-year (or longer) fixes.

Thrugelmir

swanseaboy wrote: »

@Thrugelmir: without wishing to sound rude, our household income is more than enough.

No offence taken. I was merely taking a lenders view of the situation. As your arguments carry no water regarding the tenancy.

swanseaboy

Thrugelmir wrote: »

No offence taken. I was merely taking a lenders view of the situation. As your arguments carry no water regarding the tenancy.

Glad no offence taken.

wrt my arguments carrying no water re. the tenancy, could you explain further? (genuine question - any insight is appreciated). We were told by both our broker and the Clydesdale's manager that the decision would be based on whether rental income covered 125% of the mortgage at 4.99%, which we were comfortably within.

Are you suggesting that the rental income is disregarded when applying for a BTL? (Again, genuine question - your reply is along the lines of one reply we have received from CB, but directly conflicts with another reply they gave us, i.e. the definition of a 'second home').

swanseaboy

Apols for replying to my own post, but we have finally found out the reason for our rejection.

It turns out that we should never have been put forward for the product in question, as there was an income multiple rule that we were never going to achieve. Unfortunately our broker 'missed' that condition, as did the Clydesdale when they received our initial application, resulting in the confusion that ensued, and the underwriter's inevitable decision.

Really disappointed that neither the adviser nor the bank had the guts to own up - instead we found out via another adviser, who did some digging with contacts at CB. He is now trying to get us to offer stage on another product, in the 4 weeks before we stand to lose our house, school places etc.

Thanks to all who contributed suggestions and answers.

caprikid1

"in the 4 weeks before we stand to lose our house, school places etc."


Why would failure to buy a BTL cause you to loose school places ? Are you using it to claim you live in an area you don't ?

Thrugelmir

swanseaboy wrote: »

It turns out that we should never have been put forward for the product in question, as there was an income multiple rule that we were never going to achieve. Unfortunately our broker 'missed' that condition, as did the Clydesdale when they received our initial application, resulting in the confusion that ensued, and the underwriter's inevitable decision.

.

What income rule? BTL's are not normally governed by income rules per se.

swanseaboy

caprikid1 wrote: »

"in the 4 weeks before we stand to lose our house, school places etc."


Why would failure to buy a BTL cause you to loose school places ? Are you using it to claim you live in an area you don't ?

Not at all - we were remortgaging our existing house as a BTL, and buying a new residential property. However, this is dependent on the BTL, hence the risk to school places etc.