Mortgage in Principle Possibly Declined Due to Sickness

eastlad

Firstly, sorry for the long story, but thank you for sticking with it.

Here goes… my girlfriend and I are looking to move house. We bought our current house 5 years ago for £158,000 and it has now sold for £240,000. Our family is growing and the house is too small. We have seen the perfect house for us and not a thing needs doing to it. It was a new build 2 years ago and we have offered £350,000. 

Our current mortgage has £144,000 left, leaving us in a very fortunate position of having £96,000 ‘left over’. We plan to put down a deposit on the new house for £55,000, giving us a mortgage of £295,000. Given the previous figures, we’re looking at £41,000 left over. Now minus fees (around £11,000), we will have £30,000. As I said earlier, nothing needs doing to the house, so that £30,000 will be untouched. There was talks of a wedding.

So I put both our gross salaries into the computer and got an agreement in principle no problem. We made an appointment with the bank (this Thursday coming) to proceed and get a mortgage in principle. Out of nowhere, the advisor rings me today and asks why my Mar pay is less then Jan and Feb (about £500). I told him that I’d been on sick for a minor surgery and was therefore unable to do any overtime, I hope to return to work soon. In fact, I see the doctor tomorrow morning about returning to work. He told me that he’ll likely have to cancel the mortgage in principle meeting and decline the offer. Even though I told him that I’d be declared fit to work before the meeting takes place.

I cannot understand why my overtime
is being taken into consideration when it wasn’t for the agreement in principle, which was accepted. Are they allowed to judge me for being sick?

I have even explained that IF we couldn’t afford the monthly payments (around £400 more), we have £30,000 left to supplement our salaries. Which can sustain us for over 6 years. He claimed that it is not taken into consideration. Why is that?

CSL0183

eastlad said:

Firstly, sorry for the long story, but thank you for sticking with it.

Here goes… my girlfriend and I are looking to move house. We bought our current house 5 years ago for £158,000 and it has now sold for £240,000. Our family is growing and the house is too small. We have seen the perfect house for us and not a thing needs doing to it. It was a new build 2 years ago and we have offered £350,000. 

Our current mortgage has £144,000 left, leaving us in a very fortunate position of having £96,000 ‘left over’. We plan to put down a deposit on the new house for £55,000, giving us a mortgage of £295,000. Given the previous figures, we’re looking at £41,000 left over. Now minus fees (around £11,000), we will have £30,000. As I said earlier, nothing needs doing to the house, so that £30,000 will be untouched. There was talks of a wedding.

So I put both our gross salaries into the computer and got an agreement in principle no problem. We made an appointment with the bank (this Thursday coming) to proceed and get a mortgage in principle. Out of nowhere, the advisor rings me today and asks why my Mar pay is less then Jan and Feb (about £500). I told him that I’d been on sick for a minor surgery and was therefore unable to do any overtime, I hope to return to work soon. In fact, I see the doctor tomorrow morning about returning to work. He told me that he’ll likely have to cancel the mortgage in principle meeting and decline the offer. Even though I told him that I’d be declared fit to work before the meeting takes place.

I cannot understand why my overtime
is being taken into consideration when it wasn’t for the agreement in principle, which was accepted. Are they allowed to judge me for being sick?

I have even explained that IF we couldn’t afford the monthly payments (around £400 more), we have £30,000 left to supplement our salaries. Which can sustain us for over 6 years. He claimed that it is not taken into consideration. Why is that?

It won’t be taken into consideration unless used so to reduce the mortgage from the £295k to £265k

You shouldn’t be penalised for a low month no, but what they should do is even it out over the 3 months. Let’s say your Gross pay is £4k per month and in January and February it’s £4k but in March it’s only £3.5k then that’s £11,500 / 3 = £3,833, then they would multiply this by 12 to get your yearly figure. However; as you have the most important pay statement of the year (End of March) then you can prove your yearly salary over the last 12 months. 

Shouldn’t be an issue unless you were very close to your maximum borrowing and the computer now says no. April pay is obviously going to be down too and the lender doesn’t know when you’ll be going back and earning your norm ( can only be proven through pay statements, not by word of mouth) At the end of April you will have 2 low months and 1 high and this will impact on your borrowing. 

They are not penalising you for being sick, only taking your sick pay months into account. 

Thrugelmir

eastlad said:

I have even explained that IF we couldn’t afford the monthly payments (around £400 more), we have £30,000 left to supplement our salaries. Which can sustain us for over 6 years. He claimed that it is not taken into consideration. Why is that?

The bank has zero control over the money. They are not going to take your word as gospel. People generally aren't reliable. 

Why not borrow less? Seems daft to release £30k for no particular purpose. 

K_S

@eastlad I can't comment on whether I think what the bank did was correct or not as that depends on their criteria, policies, what you put in the application and the rest of the details in the background. Based on the limited info in your post it just seems like a combination of the wrong lender plus not providing all the required info up front.

Other than in a small number of scenarios (eg: borrowing while on mat leave for some lenders) for a limited period, savings will not be considered as a source of income for making mortgage payments.

Once you have a firm return to work date and that can be evidenced, there should be sufficient mainstream lenders willing to consider even if you haven't actually returned to work at that point. Good luck!