Confused by Halifax Mortgage Decision?

c0lc0l

I am a little bit confused by a mortgage decision by the Halifax.

Myself and my now wife bought our first home in July 2012. We got our mortgage through the Halifax and have been with them since. At the time we bought our home, our financial situation was as follows:

Combined Salary = £34,000
Total combined debts (credit cards) = £10,000

My wife's credit file had a few missed payment marks from several years ago due to missed monthly payments on store cards.

We had a deposit of £18,000 and bought the house for £120,000, so got a mortgage of £102,000.

Our current situation is as follows:

Combined Salary = £45,000 (increase of £11,000)
Total combined debts (credit cards) = £20,000 (increase of £10,000)

Both our credit files are now immaculate as the wife's missing payments have now dropped off due to being over 6 years, and all mortgage payments have been fine.

Our remaining mortgage amount is now £92,600 and we are now overpaying £100 a month on top of the mortgage payments to reduce the amount owed.

We went to the Halifax to enquire as to how much we could now borrow to move home (to a nicer bigger house). We would expect our house to now sell for in the region of £130,000 based on recent sales in the street we live on.

The Halifax stated based on our income and debt they would offer us a maximum mortgage of £20,000???????????

I am absolutely bewildered and confused by this? We are earning more money now (£11k), our house is worth more than we paid for it (by £10k), we have got the mortgage amount down by approximately £10,000 so we would have approximately £37,000 equity as a deposit (instead of the previous £18k) and Halifax stated we would get a mortgage for just £20,000????

I understand our credit card debts have gone up (due to furnishing house, an engagement ring, wedding, honeymoon etc etc) but our earnings have gone up, credit files are now perfect and we will have a bigger deposit. I cannot understand how this can be?

Can anyone help shed any light on this please?

sheff6107

I suspect their own in-house policy is not to lend much to people with unsecured debt above a certain threshold. Basically they don't want to lend to you because you have £20k of credit card debt, regardless of the rest of your circumstances.

c0lc0l

Would you say the above set of circumstances would generally apply to all/most mortgage lenders? Or would some give a mortgage decision with that amount of unsecured debt?

I know online mortgage calculators are not very reliable, but when i put our financial figures into them, they all state a mortgage offer of anywhere between £120,000 to £180,000 ........including the Halifax website!!!!!!!!!

glosoli

Did they actually do a credit score, or was it stuck at fact find stage?

c0lc0l

I don't think they did a full credit search no. It was an appointment in a Halifax branch to get an idea of what mortgage we would be approved for before we started to seriously search the housing market for our next home.

glosoli

The only thing I can think of is after they took you through expenditure checks, the amount of surplus remaining did not permit them to make a recommendation for an amount above £20,000, i.e your expenditure was close to your net monthly incomes, leaving not a lot to make a recommendation with.

Presuming this is the case, have you sat down, listed your expenditures, and worked out how much would be left over to commit towards the mortgage payment? A fair chunk of your income each month must be going towards the credit card repayment (assuming 2.5%, that's £500 right there), which is a lot given your combined incomes to be honest.

Remember also that things have changed since 2012 in the way that lenders approach this.

movingagain

Why don't you pay of the £20000 with equity from the sale of your house and use the rest as a smaller deposit? I think they calculate 5% of your debt for payments that would be £1000 a month.

kingstreet

I've runs the details you've given.

£45,000 joint incomes
£20k of card debt (Halifax treat that as £1,000 a month outgoing!)

No kids
No childcare
No ground rent & service charges
25 years
No student loans
no season ticket travel loan

and I get a loan amount of £100,155.

So what out of the above is different in your case? Have you recently paid off a chunk of credit and the lender is still seeing old data on your credit file?

Try it for yourself;-

http://www.halifax-intermediaries.co.uk/tools_and_calculators/mortgage_affordability_calculator/default.aspx

Do not enter anything not requested. ie don't stick your gym membership in because another lender asked for it on theirs.

kingstreet

I input the incomes as £23,000 and £22,000.

If they breakdown as £45,000 and £0, the output falls to £59,535.

c0lc0l

Thanks for the replies

The incomes are £26,500 and £18,500.

I didn't realise they class the credit card debt as £1,000 monthly outgoings. It is all spread across 0% balance transfer cards with minimum monthly repayments totalling approx £350 (we are paying approx £650 to get the debt down quicker).

Thrugelmir

c0lc0l wrote: »

I am absolutely bewildered and confused by this? We are earning more money now (£11k), our house is worth more than we paid for it (by £10k), we have got the mortgage amount down by approximately £10,000 so we would have approximately £37,000 equity as a deposit (instead of the previous £18k) and Halifax stated we would get a mortgage for just £20,000????

To sum up it in a very rudimentary way. You've been overspending by £208 a month since you bought the house. As far as your immaculate credit file is concerned. Red flags will be waving within the lenders scoring system. How would you cope with an unexpected event that impacts your finances? In reality you haven't reduced the mortgage by £10k. You've simply borrowed the money.