Government grant - unable to borrow for "a very long time"

treetop150

I took the first SEISS grant as I had legitimately lost business due to lockdown.  Thankfully my business didn't suffer as much as it could have.  I could apply for the second grant too, as again things haven't been as normal as they were last year.

However, we are in the middle of applying for a mortgage and our broker has strongly advised me not to take the second grant or risk "not being able to borrow money for a very long time".  This has really worried me as nowhere has the government or sites like MSE warned of this.

Is our broker correct?  If taking these grants, even if you only had a very slight dip in trading income, adversely affects your credit rating or your eligibility for mortgages/loans, there should be a huge disclaimer about this.

If MSE advises us to take the grant even if we are only mildly affected, surely it could cost us much more in years to come with banks refusing to deal with us.

Our mortgage is with Virgin Money in case that's useful.

I really just want to warn people before they apply for the second grant or even better, be told our broker is wrong.  Thanks all.

gg23

Are they even asking if you've taken the grant?
I don't see how someone who, for example, took the grant would be viewed as, at worst, whatever their trading profits were pre-grant.

gg23

gg23 said:

Are they even asking if you've taken the grant?
I don't see how someone who, for example, took the grant would be viewed as, at worst, whatever their trading profits were pre-grant.

I'll rephrase that as I can't edit my last post.  The worst case scenario should surely be whatever you earned this year pre-grant.  The grant should not be used for affordablity purposes.  I think your broker is wrong but there is a Morrtgage board where you can ask this very question.

treetop150

gg23 said:

gg23 said:

Are they even asking if you've taken the grant?
I don't see how someone who, for example, took the grant would be viewed as, at worst, whatever their trading profits were pre-grant.

I'll rephrase that as I can't edit my last post.  The worst case scenario should surely be whatever you earned this year pre-grant.  The grant should not be used for affordablity purposes.  I think your broker is wrong but there is a Morrtgage board where you can ask this very question.

Yes, Virgin Money did ask us to fill in a form explaining why we took the first grant - we're still waiting on a decision.  It seems like they aren't only looking at previous income/accounts, but using the SEISS grant as a crystal ball to hint at future affordability.  If that's true, I feel like people should be warned prior to applying for it.

gg23

treetop150 said:

gg23 said:

gg23 said:

Are they even asking if you've taken the grant?
I don't see how someone who, for example, took the grant would be viewed as, at worst, whatever their trading profits were pre-grant.

I'll rephrase that as I can't edit my last post.  The worst case scenario should surely be whatever you earned this year pre-grant.  The grant should not be used for affordablity purposes.  I think your broker is wrong but there is a Morrtgage board where you can ask this very question.

Yes, Virgin Money did ask us to fill in a form explaining why we took the first grant - we're still waiting on a decision.  It seems like they aren't only looking at previous income/accounts, but using the SEISS grant as a crystal ball to hint at future affordability.  If that's true, I feel like people should be warned prior to applying for it.

Tell them it was virtually free money and you'll be paying it back for the next 30 years away through increased taxation.

Also, ask them why the banks took billions from the taxpayer back in 2008 and why we shouldn't have treated them with the same level of contempt.

MovingForwards

Have a read through the mortgage board as this question is popping up a quite a bit, where people are now in the process of trying to get a mortgage.

HopeAndDriftWood

The banks make their own decisions on mortgages. It seems a fair few have decided that businesses who needed the grants aren’t stable enough for them to want to lend to. 

My accountant advised me not to take it as we’re looking to move this year. 

mobilejo

treetop150 said:

Is our broker correct?  If taking these grants, even if you only had a very slight dip in trading income, adversely affects your credit rating or your eligibility for mortgages/loans, there should be a huge disclaimer about this.

If MSE advises us to take the grant even if we are only mildly affected, surely it could cost us much more in years to come with banks refusing to deal with us.

MSE, like almost everyone else, wouldn't have known before hand that banks may take a SEISS grant into account when assessing mortgages, and I'm sure once enough people have had that happen to them, MSE will publish something about it. But by that time it'll be too late for many of course.

Anyone that wants personalised advice that takes account of their individual situation, should seek out (and pay) a professional before doing things. MSE is good for what it is, but people should always tread carefully with financial decisions, regardless if something is suggested by MSE.

Just in case anyone has missed it, this is what MSE says at the bottom of the website pages:

"We think it's important you understand the strengths and limitations of the site. We're a journalistic website and aim to provide the best MoneySaving guides, tips, tools and techniques, but can't guarantee to be perfect, so do note you use the information at your own risk and we can't accept liability if things go wrong.

This info does not constitute financial advice, always do your own research on top to ensure it's right for your specific circumstances and remember we focus on rates not service."

Thrugelmir

treetop150 said:

gg23 said:

gg23 said:

Are they even asking if you've taken the grant?
I don't see how someone who, for example, took the grant would be viewed as, at worst, whatever their trading profits were pre-grant.

I'll rephrase that as I can't edit my last post.  The worst case scenario should surely be whatever you earned this year pre-grant.  The grant should not be used for affordablity purposes.  I think your broker is wrong but there is a Morrtgage board where you can ask this very question.

Yes, Virgin Money did ask us to fill in a form explaining why we took the first grant - we're still waiting on a decision.  It seems like they aren't only looking at previous income/accounts, but using the SEISS grant as a crystal ball to hint at future affordability.  If that's true, I feel like people should be warned prior to applying for it.

It's future income that's going to pay the mortgage. If you've hit a downturn. Then historical data is now irrelevant. Little different to an employed person being furloughed currently, i.e. is their job going to exist in a few months time. For some it isn't. 

Grumpy_chap

Is it possible that the OP can complete their mortgage quickly and, therefore, still be within the application window for the second SEISS grant?  That would be best of both worlds.

Is the broker correct that applying for the second grant will affect mortgage opportunity?  Given the OP applied for the first grant, the second grant may not make any difference in how the OP is assessed by a mortgage company.  At least if the OP applies for the grant, the OP will be up to £6.5k better off.

Even if the SEISS grant has an impact in the short term, is the broker correct to say "not being able to borrow money for a very long time"?  Or is that scare tactics?

I have no magical insight, but try to think in my own head how mortgage companies operate.  Fundamental is that they make money by lending money so will not want to unduly close off future revenue streams (customers) for longer than they really feel is necessary.  All lenders are tightening criteria right now because of uncertainty.  That uncertainty will stabilise fairly soon.  Normally, for self-employed mortgages, past accounts are used as the basis to determine income levels and borrowing limits.  With SEISS, the banks don't really understand the impact and simply see that SEISS requires the business to be "adversely impacted" but not assessing the manner or magnitude of the "adverse impact" - it seems as though the SEISS criteria are very inclusive in that regard.  Rather than rule out the majority of sole-traders from future borrowing, it seems reasonable to expect that the banks will soon develop a more sophisticated assessment tool than simply binary SEISS or NO-SEISS.

justwhat

We got DIP for porting 1.5 weeks ago with virgin mortgages. Full approval is now going through. 
Background - Our mortgage is based on affordability (we fail earnings level and always have). Been with virgin /NR for around 12 years.
Grants - We took everything. Property grant/seiss 1 and 2 etc (no BBL)
The virgin forms asked us why we took them and the effect covid has had on business. We also stated expected effect in future to our income.
The application had to go to a senior underwriter (it always does for us)
This was a ported mortgage so this will have been a factor and only 10% of the value of the property. We have a large amount of savings and a very small mortgage.
The forms looked like they wanted to see growth / how your business was going to cope coming out of covid.