strange bank requirement before mortgage

mrstingy2022
mrstingy2022 Posts: 43
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edited 12 November 2023 at 12:26PM in Mortgages & endowments
hi All
i got mortgage offer via broker but the lender put a strange requirement in the offer:

This offer is issued on the understanding that the following commitments will
be repaid on or before completion of this loan:-
Credit Card with Tesco with an approximate balance of £500.
While these debts may be repaid from the proceeds of this loan, they may not
be transferred to any other lender. Your ability to afford this loan has been
assessed on this basis.

My questions are:
1 does it mean i have to clear the balance on the credit card before completion day?
2 can i use that card after completion as normal?
3 can i contact the lender directly to clarify if broker is involved? i am worried that if i misunderstand bank requirement and use credit card then they can revoke the mortgage after completion?

Please advise as i am bit greeen
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Comments

  • sammyjammy
    sammyjammy Posts: 7,302
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    Its not unusual, they just want you to clear it, they might not check, they certainly won't call the mortgage in if you spend on it again as long as you keep paying.
    "You've been reading SOS when it's just your clock reading 5:05 "
  • dunstonh
    dunstonh Posts: 115,739
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    Nothing unusual with that requirement.

    1 does it mean i have to clear the balance on the credit card before completion day?
    The wording indicates that on or before.

    2 can i use that card after completion as normal?
    You can use the card but they don't want you to retain an unpaid balance.  They may ask to see evidence of full balance paid.   However, after that, you will not be asked again.

    3 can i contact the lender directly to clarify if broker is involved? i am worried that if i misunderstand bank requirement and use credit card then they can revoke the mortgage after completion?
    You contact your broker.  This is what they are for.

    However, this is a routine requirement for someone pushing lending criteria.


    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • thanks a lot for great answer.
    if there was an automatic payment day before completion and my balance become 100f - could it be a problem? What is logical sense of the lender making this requirement? they could as well prohibit me from eating steak as too expensive ;) (i should focus on paying the mortgage first)

    If i forgot to pay my credit balance in full could they in theory cancel my mortgage?
  • dunstonh
    dunstonh Posts: 115,739
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    thanks a lot for great answer.
    if there was an automatic payment day before completion and my balance become 100f - could it be a problem? What is logical sense of the lender making this requirement? they could as well prohibit me from eating steak as too expensive ;) (i should focus on paying the mortgage first)

    If i forgot to pay my credit balance in full could they in theory cancel my mortgage?
    In reality, on £500 nothing would happen.   Technically it is breach of contract which would make it easier for them if they needed to repossess but what are the odds of that! 
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • user1977
    user1977 Posts: 13,396
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    thanks a lot for great answer.
    if there was an automatic payment day before completion and my balance become 100f - could it be a problem? What is logical sense of the lender making this requirement? they could as well prohibit me from eating steak as too expensive ;) (i should focus on paying the mortgage first)

    If i forgot to pay my credit balance in full could they in theory cancel my mortgage?
    The logical sense is that you had (presumably) declared as part of your application that you wouldn't have any other debts, so they want that one cleared.

    But they won't check, or demand that you immediately redeem your mortgage even if they find out.
  • Just clear it before completion, send solicitor the statement to show 0 balance, then spend on it again once completed.
  • amnblog
    amnblog Posts: 12,389
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    The Lender expects that this £500 debt is cleared on of before completion day.

    This is because the application has been submitted on the basis this debt will be cleared on or before completion of the mortgage.

    Lenders have no way of checking other than through your Solicitors.

    Some Solicitors will simply highlight this condition to you and leave to you to satisfy it.

    Occasionally, the borrower will have a Solicitor who insists on seeing evidence that the debt is clear before they will complete the mortgage.


    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, 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.
  • user1977
    user1977 Posts: 13,396
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    Just clear it before completion, send solicitor the statement to show 0 balance, then spend on it again once completed.
    There's been no suggestion that the solicitors have been instructed to get involved with the condition (and they wouldn't normally).
  • user1977 said:
    Just clear it before completion, send solicitor the statement to show 0 balance, then spend on it again once completed.
    There's been no suggestion that the solicitors have been instructed to get involved with the condition (and they wouldn't normally).
    Mine did. They asked for a statement to show it cleared before completion as per the mortgage offer. That's why I suggested it and it's not uncommon for them to ensure the buyer complies with the condition.
  • user1977
    user1977 Posts: 13,396
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    user1977 said:
    Just clear it before completion, send solicitor the statement to show 0 balance, then spend on it again once completed.
    There's been no suggestion that the solicitors have been instructed to get involved with the condition (and they wouldn't normally).
    Mine did. They asked for a statement to show it cleared before completion as per the mortgage offer. That's why I suggested it and it's not uncommon for them to ensure the buyer complies with the condition.
    In the OP's case at least it's before or on completion, so no need for it to be done prior to completion - and I can't see any solicitor opting to get involved with paying off a client's credit card bill as a completion task.
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