Halifax mortgage declined - Appeal chances?

Hi, hoping for some advice/similar experiences and outcomes.

background:

Purchased house 9 years ago in husbands name only - with 40% shared equity loan.

looking to take out new mortgage with same lender (Halifax) and:
1. Add my name to mortgage
2. Take more to pay off shared equity stake
3. Take additional funds for home inprovements

Husband is self employed (director) and I was employed by the company (for past 5 years) but became a director in April this year with 50% shareholding, so now we are both 50% shareholders.

My income is the same now as it was before I became a director - reason for becoming director was purely for tax efficiency. 

Application was submitted for £170k - affordability calcs showed we could borrow up to £233k, so way below the limit.

Credit checks all passed no problem and income eventually signed off after a bit of back and forth with SA302’s not matching TYO’s.

Business assessors had it for about a week and then asked for previous 2 years accounts and eventually declined the application due to 2020 profit being less than 2019 (inevitable for most companies) they said they were not satisfied the business wasn’t negatively impacted by covid and and we’re not confident the business could support the directors incomes. 

My Accountant wrote a report explaining and rationalising the accounts and provided management accounts for this year of an increase in Turnover and profit and gave his opinion that the business was operating successively and shows no reason why it cannot support our income. MA appealed the decline with the support from the letter but underwriters have declined again, stating affordability. Said they would approve a ‘like for like’ with my name, but this doesn’t help us much.

Any advice on anything that will help underwriters budge? Is it worth asking again for the amount to pay off shared equity and not home improvements? Any other lenders that anyone can recommend that will be more suitable for us? Anybody had similar situation and have had a successful appeal - or second appeal? 

Would have a product exit fee if we left halifax which is why we chose them.

Thanks in advance for any advice, it’s a bit of a complicated one I know, hope I’ve explained enough. 
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Comments

  • Edi81
    Edi81 Posts: 1,427
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    Did you apply direct to Halifax or use a broker?
    Are you in a fixed rate deal? If so, when does it finish? This will determine if you Will need to pay an ERC. 
  • Ig1
    Ig1 Posts: 6
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    @Edi81
    Hi, yes we are in a fixed rate, with 3 years left 😔 the ERC is around £3k, which if rather avoid but if there was a chance another lender would accept us then I’d take the hit of the ERC.

    We went direct with Halifax.
  • Thrugelmir
    Thrugelmir Posts: 89,546
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    Ig1 said:

    My Accountant wrote a report explaining and rationalising the accounts and provided management accounts for this year of an increase in Turnover and profit and gave his opinion that the business was operating successively and shows no reason why it cannot support our income. 
    There's no certainty as to what lies ahead. The Halifax haven't singled out you for particular treatment. Policies are set at the macro not the micro level. 
  • Ig1
    Ig1 Posts: 6
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    @Thrugelmir

    Hi, thanks for your reply.

    Our year end is 30th June, so the managements accounts the accountant provided showed the actual figures (up to last week) so almost the full years accounts and the profit was an almost 220% increase. So it wasn’t a projection but actual facts and figures. 

    Can you explain more about the policy macro levels you refer to? Are the underwriters looking for a certain % of profit? What are they actually looking for in business accounts? Thanks  

  • K_S
    K_S Posts: 6,671
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    edited 28 June 2021 at 9:14PM
    @ig1 It's not clear if the MA you refer to is a Halifax advisor or a whole of market broker. If the latter, then while you are pursuing your appeal with Halifax, it might be worth considering asking the broker to source another lender in parallel and progress an application.

    It's not fully clear from your post as to what the Halifax decline is primarily based on and whether the numbers stack up. But if the business is visibly up and running and the recent change doesn't appear contrived (not suggesting it is, just how it appears) to better your chances of a mortgage, you should have other options. Good luck!

    I am a Mortgage Adviser - You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. 

    PLEASE DO NOT SEND PMs asking for one-to-one-advice, or representation.

  • Ig1
    Ig1 Posts: 6
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    @K_S

    Hi, thanks for your reply.
    The MA is direct with Halifax, he doesn’t seem to agree much with the underwriters initial decision and was confident with the appeal, I haven’t spoken to him today since they declined again (I called call centre after work and was given the info) so will speak more tomorrow with him.

    The increase in turnover and profit is natural and was projected/expected, and is set to increase further, the net profit for 2020 was lower than 2019 as we closed for a short period at the start of lockdown, but still managed to net a profit and maintain our income. It’s very frustrating as I just don’t know what the underwriters actually look for. The initial application began mid May, which is why I’m reluctant to start the process again with another lender, also heard Halifax are the best for self employed so with this result from them I’m less than hopeful for another lender. Feel like I’m stuck between a rock and a hard place and don’t know what else we could do.
  • With your change in circumstances you are now self employed with less than 2 years accounts.   By accepting your income then Halifax are already bending policy to make the numbers work on paper.   Its obviously just a bend too far when they have seen the accounts.  Technically they require 2 years accounts but will accept 1 if they can.

    You have done this direct as brokers cant add clients to existing mortgages.  With a decline after appeal on file then i cant see anyone looking at it again until you have a different set of accounts to show them
  • lonibra
    lonibra Posts: 365
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    With your change in circumstances you are now self employed with less than 2 years accounts.   By accepting your income then Halifax are already bending policy to make the numbers work on paper.   Its obviously just a bend too far when they have seen the accounts.  Technically they require 2 years accounts but will accept 1 if they can.

    You have done this direct as brokers cant add clients to existing mortgages.  With a decline after appeal on file then i cant see anyone looking at it again until you have a different set of accounts to show them
    Hi Deleted_User. Do you mean Halifax or do you mean no bank will consider at all?

    OP - get an experienced MB on the case. They don't faff around and will tell you quick enough whether you stand a chance or not with another bank.
  • Ig1
    Ig1 Posts: 6
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    Spoke to the MA this morning, he hadn’t actually filed the appeal yet, he had just sent the accountants letter back to the underwriters as ‘additional information’ which they again declined, so he is now sending the full appeal. Will just need to keep my fingers crossed. It’s amazing that any of our staff members could have a mortgage no problem with the salaries our business pays them with no scrutiny but for the directors it’s a case of jumping through hoops 🙈
  • that's because a director can change their salary at will and a normal employee cant. Much easier to create a false situation. 
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