Can't get a mortgage because of income to debt ratio 30 December 2014 at 1:56PM in Mortgages & endowments 17 replies 2.5K views

mjn

We have been refused a mortgage because our unsecured debt is roughly the same as my wife and I combined income. Approx £40k. We our selling our house which has a mortgage of £249k to buy a house needing a £145k mortgage. We are using the remaining equity after paying a deposit to pay off most of the debt.
Nobody will lend due to our CURRENT debt and not our projected outgoings.
I know people will say you will run up debt again, but that can apply to anybody.
Does anybody know of a flexible lender who will listen. We've been rejected by Nationwide and Woolwich even after my broker explained the situation to them.

ACG

Are you applying yourself or through a broker?
On the application forms are you ticking that the current debt you have will be cleared by the time the new mortgage completes?

Ive had 1 similar case go to offer yesterday without even a murmur from the lender and fully expecting another to go to offer within the next week without any issues.

It might be wise to either go back to the lender(s) you have applied to and ensure they understand or go and speak to a broker as im sure this can be placed.

Who has declined you? Im going to take a guess at Woolwich?

mjn

My broker is dealing with it. Woolwich rejected because of debt ratio. Nationwide said they didn't use that as a reason but still rejected it anyway.
What lenders are most flexible?

ACG

The application was never going to get accepted with Woolwich - its standard criteria.

Im not allowed to mention specific lenders, but I think you should speak to your broker and tell them to ensure he/she checks the amount of debt is not an issue before applying, as it stands he has wasted a credit search for no good reason.

Assuming everything else stacks up there are high street lenders for it.

We have account managers, this is one of those little quirks that will mean it does not fit with every lenders and so the case should be run past an account manager or underwriter first.

mjn

He did phone Nationwide and they said ok! The computer said no with no right to appeal. The figures work out. It baffles me.
We have now had two applications and he and I are worried about too many applications.
I'm a bit worried no one will lend.

Thrugelmir

mjn wrote: »

I know people will say you will run up debt again, but that can apply to anybody.

Statistically it's a fact that this is the case. If the debt has amassed through mismanagement of personal finances rather than a specific reason. Then yes, lenders will be wary. Giving an easy exit route results in no lessons being learnt.

to pay off most of the debt.

Lower your expectations and clear your debts totally. While you get yourselves back on an even keel.

ACG

Find a new broker?
Its not uncommon that some brokers struggle with certain cases if its not their forte.

For instance, I do not do shared ownership. Sometimes you have to admit when your out of your depth.

mjn

I think going from a four bedroom detached to a three bed semi with no heating and two kids is a big compromise. It is as cheap as possible in the area where I live.
Trying to do the right thing. Thats the trouble, people too quick and assume you will run up debt. Anybody who applies for a mortgage could do this.
If you default your payments they can take the house off you. That is their security.
Frustrating!

Senior_Paper_Monitor

Nationwide are proving to be less than enthusiastic about consolidation at the moment (even when well within their criteria).


There are other lenders.

koexelek

ACG wrote: »

Find a new broker?
Its not uncommon that some brokers struggle with certain cases if its not their forte.

For instance, I do not do shared ownership. Sometimes you have to admit when your out of your depth.

I do shared ownership mortgages... hence I have no hair left

greenval

I understand your frustration as you are trying to do the right thing but surely an applicant who has saved for a deposit and managed their finances well thus far and has no/minimal debt is a better proposition than someone who may have learnt their lesson but whose application shows that historically at least they are prone to getting into debt.