Declined due to sinking fund - help!

lec123

Hi all,


My partner and I have applied for a mortgage with Leeds Building Society on a shared ownership flat. The valuation was done last week (10th Nov) and have just found out Leeds have declined due to the fact the block of flats has a sinking fund to pay for future repairs.


Our broker has never heard of this before and is going to try and get them to reconsider, but has anyone heard of this happening before and if so what is the reason for it? And is there anything we can do to help our case?


Thanks!

Stevie_Palimo

If you have had sinking fund info come back steer well clear and look at another property plus think yourself lucky you did not get drawn into this one and end up with a large bill for repairs as they are foreseeing.

Goldiegirl

It's a term that I hadn't heard before so I Googled it.

I imagine the lender thinks it's too much of a risk that you could get landed with a huge bill for repairs.

If they won't lend, no one can force them too.

Either find another lender, or find another property - personally I'd find another property

lec123

Thanks for the quick replies.

In fact if there is a sinking fund, it means we are paying £50 a month towards a fund that pays for any repairs, so we will not be hit with any additional repair bills in the future. Most shared ownership flats have this and Leeds is a popular lender for shared ownership.

I guess we will have to find a new property. Any other replies welcome!

libf

lec123 wrote: »

Hi all,


My partner and I have applied for a mortgage with Leeds Building Society on a shared ownership flat. The valuation was done last week (10th Nov) and have just found out Leeds have declined due to the fact the block of flats has a sinking fund to pay for future repairs.


Our broker has never heard of this before and is going to try and get them to reconsider, but has anyone heard of this happening before and if so what is the reason for it? And is there anything we can do to help our case?


Thanks!

My shared ownership flat has a sinking fund. Neither Woolwich or Nationwide have queried it when I've had mortgages with them. Try a different lender before you look for another property.

Thrugelmir

What's the sinking fund for. In principle sinking funds i.e. building reserves for future maintenance is a sensible policy. Getting all leaseholders to stump up a lump sum isn't easy.

audigex

The bank doesn't care if you have to pay that (unless they find that the £50/month puts you over their affordability criteria)

They care that either it suggests there's a known issue, or because they don't want the risk that if you default on the mortgage, they're liable for £600/year (plus any existing ground rent costs) until they can sell the flat on.

Some banks, as far as I'm aware, have a maximum ground-rent-to-mortgage (or value) ratio for this very reason, and the £50 may push them over the limit.

lec123

Thanks all for the info, will try and find out from the broker what the specific problem with it is, to avoid the same happening with a different lender.

libf

lec123 wrote: »

Thanks all for the info, will try and find out from the broker what the specific problem with it is, to avoid the same happening with a different lender.

IIRC the sinking charge on my block is about £30... So maybe £50 is just on the high end? I guess it would depend on the size of the block too... Definitely chat to the broker.

lec123

libf wrote: »

IIRC the sinking charge on my block is about £30... So maybe £50 is just on the high end? I guess it would depend on the size of the block too... Definitely chat to the broker.

I see, yes maybe that is the issue the lender is having. Will chat to the broker, not sure if anyone is interested in the outcome but I will post an update if we do manage to turn it around, although I know it's unlikely!

tiger_eyes

My shared ownership flat also has a sinking fund that's funded monthly from the service charge. Halifax was the lender and never made a peep (about the sinking fund, at least).