Cash budgeting- impact on a mortgage application

ellspacer

My son has a good credit rating but he finds it difficult to budget on a day to day basis using his bank account. His solution is to use cash. When he gets paid, he pays his bills and into his savings, the remainder he withdraws and sets himself a weekly budget. If he needs money in the account during the month, he gives me cash and I put the money in. This method has been very successful for him but I am worried when he applies for a mortgage next year it will have an impact. I would appreciate some advice. Thank you in advance for your time. 

MWT

ellspacer said:

If he needs money in the account during the month, he gives me cash and I put the money in.

How are you doing this?

If you are transferring from your account to his, then that is the bit that will need to be explained to the broker when he starts on the path to get a mortgage.

How often does it happen and what sort of amount each month?

Shouldn't be an issue though, just tell the broker about it, don't wait to be asked.

ellspacer

Typically I make a 3-4 deposits a month by bank transfer, usually under £100, when he wants to buy something online or he does not have access to his cash. He used to send all the money to me and I fed it back to him weekly but we have not worked this system for over a year.  He also likes his holidays alot and sends large sums to his girlfriend every month to pay for them. My concern is that he runs for most of the month on an empty bank account. Thank you. 

MWT

ellspacer said:

... He also likes his holidays alot and sends large sums to his girlfriend every month to pay for them. My concern is that he runs for most of the month on an empty bank account. Thank you. 

With these added details it becomes a paints a rather different situation...

I am not passing judgement, but you are painting a picture of someone who is not good at managing his finances without help from you and is more focused on spending what he receives each month than on saving towards his deposit, is the mortgage something that he actively wants?

Spending 'large sums' every month on holidays is likely to have to stop if he really wants the mortgage unless he has a considerable income, do you think that is possible?

housebuyer143

I was going to say, that long term this isn't a great way to manage finances.. What if you can't do this for some reason? Banks closing daily and soon it will be very hard to deposit cash.
He might be worth managing his money with a spreadsheet where he writes down how much he spends and it deducts from the money he has free, this way he can keep track of it?

ellspacer

He has a very good salary, can afford his holidays, bar a small car loan has no debt, has his deposit in  a LISA and savings, but yes he was awful at managing money.  I have worked with him over the last couple of years at learning to budget better and to save. This system works well for him. Tried the spreadsheet and he kept forgetting to fill it in and overspent, he is awful at mental arithmatic and is very much a visual learner. By seeing the money he has he budgets well, always has a contingency fund and usually money left at the end of month. If I am not around he deposits in the PO. Your first impressions of him is exactly the reaction I am worried a bank will have when he goes for a mortgage. 

housebuyer143

ellspacer said:

He has a very good salary, can afford his holidays, bar a small car loan has no debt, has his deposit in  a LISA and savings, but yes he was awful at managing money.  I have worked with him over the last couple of years at learning to budget better and to save. This system works well for him. Tried the spreadsheet and he kept forgetting to fill it in and overspent, he is awful at mental arithmatic and is very much a visual learner. By seeing the money he has he budgets well, always has a contingency fund and usually money left at the end of month. If I am not around he deposits in the PO. Your first impressions of him is exactly the reaction I am worried a bank will have when he goes for a mortgage. 

Fair enough. I don't think it's too bad as long as they can understand why he's doing it that way. Many banks don't even look at the bank statements other than to see the salary is going in 👍 he should be fine. 

MWT

ellspacer said:

Your first impressions of him is exactly the reaction I am worried a bank will have when he goes for a mortgage. 

The lenders will react initially to the fundamentals, which by your account are solid, good salary, deposit saved, and no debt other than a car loan, the rest just may take a little explaining as it is not typical.

The important question to answer is how his credit file looks?

He needs to register with something like 'Check My File' and download his multi-agency credit report to see if there are any historic problems showing like late payments or any defaults that may have occurred accidentally but will still show on the file...

ellspacer

Thank you both for your advice. His credit rating is good. He took the car loan out specifically to address help this. Hopefully it will all work out for him

MorningcoffeeIV

ellspacer said:

Thank you both for your advice. His credit rating is good. He took the car loan out specifically to address help this. Hopefully it will all work out for him

His credit rating isn't relevant. He needs to look at the data on his files.

Sncjw

Is he buying a house with his girlfriend? 

Has he sat and worked out a budget for household expenses as this might give him a shock to actually start to budget more