Refused mortgage because bank thinks we will rent it out

megaman_200x

Hi there,
My girlfriend has applied for a foreign currency mortgage for a house in our home town in Northern Ireland we were hoping to turn into a family home. She works in Dublin which is why she needed to go with a foreign currency, the plan would be for her to move back home and into the property as she now has the ability to work from home long term.
The bank contacted her today to say unfortunately they had to refuse, they said financially everything was good and they could approve the amount but they refused based on the house because it was in a student area and it was to date being used as student accommodation. They were implying she would be renting out the house as it's a rental property in a rental area. That's genuinely not the case, it's an old Victorian semi-detached house and her plan was to reverse the changes made for rental and sympathetically restore the house to former glory, she explained this to the bank but they weren't interested.
I'm just wondering if anyone knows if these are acceptable grounds for refusal? to me it seems like the bank are basically saying "we don't believe you" any help would be great.

Thanks!

FBaby

Did she get a surveyor in to draw plans on how she'd return it to its non student like state? If so, she could share it if dated before the mortgage was refused. 

megaman_200x

No she didn't, she was looking for the bank to state the surveys they would require (damp, wood worm survey for example). There's not much that needs changed the property has fire doors, emergency lighting and a sink in each bedroom, these would be removed.

davidmcn

Quite a common suspicion if buying somewhere remote from where the borrower currently is. Banks have had their fingers burnt before. Assuming she just applied directly to the bank, she might be better going via a broker to find a more flexible lender.

D.L

It doesn't seem like a illegal discriminatory reason to refuse your girlfriend. You can try and convince them otherwise but you ultimately cannot force them to lend you their money.

megaman_200x

Yeah she did go direct and a broker is our next port of call thanks. I was just trying to see if we had any recourse with the current bank to get them to reconsider. Is it not illegal to apply for a home owners mortgage with plans to rent the property out? Is the bank not effectively accusing her of trying to break the law?

davidmcn

megaman_200x said:

Is it not illegal to apply for a home owners mortgage with plans to rent the property out? Is the bank not effectively accusing her of trying to break the law?

Not really "illegal" (I suppose it might be construed as fraud) but more importantly it would be a breach of the mortgage conditions. Yes, that's what the bank is concerned about. Don't take it personally!

Comms69

megaman_200x said:

Hi there,
My girlfriend has applied for a foreign currency mortgage for a house in our home town in Northern Ireland we were hoping to turn into a family home. She works in Dublin which is why she needed to go with a foreign currency, the plan would be for her to move back home and into the property as she now has the ability to work from home long term.
The bank contacted her today to say unfortunately they had to refuse, they said financially everything was good and they could approve the amount but they refused based on the house because it was in a student area and it was to date being used as student accommodation. They were implying she would be renting out the house as it's a rental property in a rental area. That's genuinely not the case, it's an old Victorian semi-detached house and her plan was to reverse the changes made for rental and sympathetically restore the house to former glory, she explained this to the bank but they weren't interested.
I'm just wondering if anyone knows if these are acceptable grounds for refusal? to me it seems like the bank are basically saying "we don't believe you" any help would be great.

Thanks!

It's their money. They can refuse you for pretty much any reason (there's a maximum of 10 exceptions in the UK, but you arent applying in the UK- and anyway this isnt one of them.)

caprikid1

"I suppose it might be construed as fraud" ? Might be ? No might be about it, it is blatant mortgage fraud. Lenders lend at a different rate and terms and conditions on residential vs BTL. Lenders are very suspicious of it, you have to remember that a typical MAX LTV on a BTL is 85% and often based not on value but rental income. A residential normally could go all the way up to 100% in some circumstances. Lenders see BTL as more risky and charge accordingly. Not obtaining content to let is also mortgage fraud.

eddddy

megaman_200x said:

...they said financially everything was good and they could approve the amount but they refused based on the house because it was in a student area and it was to date being used as student accommodation. 

What exactly did they say - are you sure you haven't misinterpreted it?

Could they be saying that the house isn't suitable security for a mortgage because of the area it's in? i.e. It's an area with a very low level of owner occupation. So it may be difficult to sell quickly, if they need to repossess.

So it's not that they doubt your girlfriends intentions, it's that they won't lend on houses in areas of low owner occupation.

davidmcn

caprikid1 said:

"I suppose it might be construed as fraud" ? Might be ? No might be about it, it is blatant mortgage fraud.

Sure, but I meant more that the cops aren't going to be interested. The bank would have the same attitude whether or not it were a criminal offence.