Help explaining debt to a lender

Sashisg

Hi all,

Forgive me if this is in the wrong place, I'm new to the forum.

I'm partway through my mortgage application with an AIP fron Kent reliance. It is a shared ownership mortgage and we're looking at purchasing a 40% share.

I previously (7 years ago) had some bad debt which was put onto a debt management plan. I continued to pay this agreement with no missed payments. During the application, I was advised to pay the remainder off which has been done but the lender would like an explanation of the debt.

Is there anyone out there with experience know what I should be including in this explanation? I appreciate they want to understand the circumstances that lead to it but is there anything I ahould include that will help explain it better?

Am I at a lost cause?

ANY help would greatly be appreciated.

Kind regards,
Sashi

Thrugelmir

All you can do is be factually correct.

The question the lender will asking (without actually saying it) is why suddenly you and how decided to pay the debt off just before making a mortgage application. Why didn't you do so earlier if you could. Where did the money come from i.e. savings, loan from family or friends etc.

Sashisg

Thanks,

Truth is I hadn't paid off the plan because it was a fixed amount not accumulating interest. I was also unaware that the plan would have an impact on my ability to get a mortgage. I paid it off with savings as advised by my broker but it's really put a spanner in the works.

The debt no longer appears on my credit file as its so old and I have a squeaky clean record since with no missed payments.

I'm not looking to cover anything up, I just want to make sure I provide a satisfactory explanation.

We hadn't planned on buying so soon but the opportunity presented itself which is ideal for us both.

Thanks again!

nkkingston

It slightly depends on how you built up the debt in the first place. Was it an unexpected expense that made you overindebted, or did you just fall into the habit of overspending during a long period? Either way, you want to spin it to show you're a responsible borrower now: you've learnt to budget, to save for emergencies, to stick to a repayment plan. Don't leave them worried that you'll default on your mortgage the minute the boiler packs up.

David_White

Sashisg wrote: »

as advised by my broker

The real answer is just tell the truth, that said I would strongly advise getting your broker involved as they will be best placed to help you.

ACG

Theyre not looking for war and peace, they just want to know what it is. I would not go as far as to say its a tick box exercise, but short of saying it was a drug deal that went wrong they are likely to be fine with it.

A quick one or 2 paragraphs should be fine.