Do Mortgage companies look at your spending habits?

oneblondebrow

Hi all,

We are looking at selling up and moving elsewhere, We will have a 20 - 25% deposit with the equity of the sale of our current property.

Would a mortgage company look into our spending habits as we do live to our means, are not really big savers and do have credit card debts which we pay off monthly and move to 0% cards, I have read that some mortgage companies may look back 3 months to spending habits and not look favourably on multiple purchases of takeaways for instance, Is it only likely to be three months? is it worth us raining in our spending for 3 months before trying to get a mortgage? Maybe chip away at some of our Credit card debts (mostly accrued purchasing vehicles for our jobs and a holiday).

Thanks

Thrugelmir

Mortgage lenders can glean your spending habits from the datasets they obtain from the CRA's. What you spend your money on is of no consequence. They can see accounts where minimum payments are made, 0% balance transfers, obviously see how your debt has built up etc etc.

You need to be honest with yourselves. A mortgage is a long term commitment. 25 years of on time payments. In which time you may fall ill, lose your job, have children or simply suffer financial misfortune. Best to get your own house in order. Mortgage lenders simply follow the rules imposed on them.

dimbo61

Under the new MMR all lenders will check your debts,savings, income, deposit, kids, etc
When we applied last year they wanted to know how much I spent on a hair cut.
So 20-25% Deposit GOOD
Credit Card debt BAD
No Savings Bad
Cut out the takeaways and try to reduce your spending
Yes they do ask for your Last 3-6 months wage slips and Bank statements

kingstreet

The "eat beans on toast for three months" before applying for a mortgage the media seized on last year was mostly hype.

Most lenders use ONS stats for outgoings and only note things like credit, childcare, maintenance etc. which sets you apart from others.

There are one or two who analyse every penny you spend who seem unable to comprehend that if you hit a bad patch you will actually stop spending on some of the things we would normally term "discretionary".

Avoid them and you should have a trouble-free application.

MARTYM8`

kingstreet wrote: »

The "eat beans on toast for three months" before applying for a mortgage the media seized on last year was mostly hype.

Most lenders use ONS stats for outgoings and only note things like credit, childcare, maintenance etc. which sets you apart from others.

There are one or two who analyse every penny you spend who seem unable to comprehend that if you hit a bad patch you will actually stop spending on some of the things we would normally term "discretionary".

Avoid them and you should have a trouble-free application.

Yes - other considerations are pension contributions as they are treated differently in affordability calculations by lenders.

Now you might think faced between the choice of being homeless or stopping your pension contributions for a bit was a no brainer some lenders assume you would rather choose the former!

oneblondebrow

Thanks for all your replies.

Would it put is in bad standing if we try getting a mortgage in principle and either get refused because of our debt or spending habits or get offered a really bad rate so say no to it?

Mahsroh

Hi, first time poster here!

At the risk of stating the obvious I would always try to clear any credit card debt first as this is not likely to help your case in securing a Mortgage or getting the best interest rate.

As others have said, I don't think most lenders will go to great depths but I do think it's excellent practice to get into the habit each month of NOT spending whatever your mortgage payment will be.... if that makes sense.

Let me explain......

I'm in a reasonably unique situation that I own a BTL property, but also rent (due to moving from the Midlands to the South East). At the moment I pay rent at £900pcm and the Mortgage repayments are circa £600pcm. With the difference in prices between the Midlands and South East myself and my partner are "holding out" on buying a property "down south" until we have sufficient equity on the BTL property along with sufficient funds to buy a family home (it's just myself and my partner.... for now!!). We know that to buy said family home in our current location we'll be needing a Mortgage that will cost us circa £1,500pcm. On that basis we currently do all our budgeting not accounting for the monthly rental income. The rental income each month gets split roughly 50/50 between savings and Mortgage overpayments.

We're fortunate that we can afford to do this (although it does mean some tight budgeting). But, this has three benefits.

1. The obvious: Mortgage overpayments and savings can only be a good thing.
2. We're not reliant on the rent - if our tenants suddenly gave us notice and we had a period with the property empty it wouldn't affect our ability to pay the bills.

and (the reason for my post):

3. It will demonstrate to a Mortgage lender when we do come buy a family home that we can afford the £1,500 monthly repayments (on the basis that we're currently paying rent @ £900 and a Mortgage @ £600 without relying on the income from the latter).

So to cut a very long winded story short, rather than focus on where you're spending your money etc, my advice (albeit i'm no expert) would be to focus on demonstrating to the lender that you can afford your monthly repayments by setting aside the different between your current mortgage and your new mortgage each month.

Hope that makes sense!

elverson

In general they won't go through your bank statements line by line.

Childcare and existing debt are obvious costs which the borrower couldn't cut back so these are given more weight.

gjheward91

the lender I currently have an application with did go through my statements line by line, and asked about my paypal transactions as they average about £30p/m and asked if it was a commited payment each month, and asked what Trent services was, its my pet insurance.....

elverson

This article explains what your bank statements can reveal, although it is a couple of years old now.

http://www.mortgagesolutions.co.uk/better-business/2014/04/28/how-to-think-like-an-underwriter-assessing-bank-statements/

oneblondebrow

Thanks for all your replies so far, It's a shame that mortgage companys don't take into consideration that most people can change their spending habits if required, When your flush you spend when your not you don't, I suppose this is not something you can prove though , Guess we will have to have a very boring 6 months.