Mortgage in principle denied - why?

haras_n0sirrah

flavianatill said:

MattMattMattUK said:

There are not thresholds for debt, but having a large unsecured debt is not a good thing. What throws up warning signs for lenders is accumulating debt, which you have done.

You have taken a mortgage holiday, paying extra will not change that. Whilst it will have little effect in the medium to long term, being that it will have only been a few months ago that you told the bank that you were in such financial difficulties that you could not pay your mortgage then you can understand why they would be cautious about lending you any more money at the moment.

You have also not said what you earn, how much you are trying to borrow and how much you will be able to put down as a deposit, there will be £283k left over after mortgage and debt repayments, but you also have to account for fees for selling, as well as for the new house purchase, stamp duty, legal fees when buying etc. so maybe around £250k?

We want to borrow £250K for a house worth £400K (with £150K deposit). We are self employed, earning £42K a year (last 2 years average). 
Do you think it's better to try and reduce the loans, rather than pay back the 3 months of mortgage holiday? We took the mortgage holiday just because it was easy to get during Covid, not because we really needed it - we stupidly didn't think it would affect future lending decisions. 

paying back the holiday won't make a difference - what is done is done. I had a client who used the payment holiday to clear credit cards and worked throughout (employed) with no change in income. Declined to port as and I quote 'you have been clearly under financial pressures as you have taken a payment holiday and we do not feel it right to increase the burden' - appeal declined. You won't get anywhere with Nationwide. You will need to change lender
Also is the 42k between you? If it is you won't get 250k

happyindebt

MattMattMattUK said:

Your best option would be to speak to a broker rather than trying to go direct to Nationwide, who are notoriously fussy, especially for the self employed.
When you say "we", do you mean you earn £42k each, or combined?

Sorry, got the figure wrong there - we earn £57K combined, per year. We had bad experiences with brokers (long delays), and this Nationwide mortgage we have now (that we took 4 years ago) was so easy and quick that we thought we would go directly with Nationwide again.

MattMattMattUK

flavianatill said:

MattMattMattUK said:

Your best option would be to speak to a broker rather than trying to go direct to Nationwide, who are notoriously fussy, especially for the self employed.
When you say "we", do you mean you earn £42k each, or combined?

Sorry, got the figure wrong there - we earn £57K combined, per year. We had bad experiences with brokers (long delays), and this Nationwide mortgage we have now (that we took 4 years ago) was so easy and quick that we thought we would go directly with Nationwide again.

Your absolute maximum borrowing, without any adverse issues would be £285k, but with the unsecured debt, the mortgage holiday and the current economic and risk climate you are unlikely to get close to that. As there is around £130k left over you might need to use some of that to reduce the amount you are looking to borrow, I would suspect that you will only be able to borrow around £200k and you may well have difficulties in the short term.

Brokers are almost always the best option, especially for the self employed, I would suggest you speak to an independent broker and get some proper advice so you can make a decision on the best way forward. 

haras_n0sirrah

If the debt is cleared then you should be able to get what you are looking for subject to the last 3 months business bank statements showing that your income has returned 
Did you take any bbl or seiss grants?
Nationwide is currently the slowest lender. 

happyindebt

haras_n0sirrah said:

If the debt is cleared then you should be able to get what you are looking for subject to the last 3 months business bank statements showing that your income has returned 
Did you take any bbl or seiss grants?
Nationwide is currently the slowest lender. 

Yes, £22K company bbl. 

Thrugelmir

flavianatill said:

Bad stuff

1. We took a mortgage holiday of 3 months during Covid;

Good stuff:

1. We always paid our Nationwide mortgage in time.

Statements are contradictory. Lender will naturally look on the downside. 

MattMattMattUK

flavianatill said:

Yes, £22K company bbl. 

Is it a company BBL, as in owed by a Limited company? As you have said you are self-employed the loan is in your personal name, which would mean you have £22k + £37k = £59k debt, which is an even bigger reason your new mortgage application was denied. 

haras_n0sirrah

Other lenders are more likely to take a view - nationwide is the wrong lender for you as they are currently using any excuse to decline as they have too much riskier business being one of the only lenders supporting 90% they are trying to make the rest of their business very straightforward to compensate.
Nationwide are the wrong lender for you at this current moment in time

MWT

flavianatill said:

haras_n0sirrah said:

If the debt is cleared then you should be able to get what you are looking for subject to the last 3 months business bank statements showing that your income has returned 
Did you take any bbl or seiss grants?
Nationwide is currently the slowest lender. 

Yes, £22K company bbl. 

Find a good broker, you are going to need one with all the negative aspects you have in play.

Thrugelmir

Given your financial position, lenders have a duty of care to assist you. Draw up a sensible plan to downsize and clear your debts. Time for a total reset.