RBS refusing mortgage offer. Any advice please?

nunntrev

Hope you can advise?
- I am applying for a 25% loan to value with RBS.
- I have no debts, strong income and passed the affordability checks. I have no existing mortgage
- I require a remortgage to complete extensive works to improve the house (it is a detached, unlisted 1980s house in need of remodelling).
- RBS own mortgage guidelines state that remortgage can be used for home improvements,
- Having initially applied and locked in a rate at the time of application in July 2022, RBS were painfully slow in considering the application and refused it in Dec 22 for spurious reasons, during which time interest rates had risen dramatically (my suspicion is that they were looking for a reason to refuse to honour the mortgage because the rate was locked in before rates gradually rose 1.5%)
- I complained to Financial Ombudsman who found in my favour in August 2023 and insisted that the Bank pay compensation (which they did) and honour the rate as at July 2022
- In the meantime, we were forced to begin work on the house on our savings
- RBS' underwriter insisted on doing an "after works" valuation based on the eventual value of the house once works are completed.
- This was £200K more than their original valuation, so the LTV was even lower
- However, the Bank are now saying they won't make an offer on an "after works" valuation (even though it was they who insisted on it) and are refusing to make an offer
- My young family and I are now living in a freezing caravan on site with no prospect of funds to complete the house despite it being 18 months since we began the application process and with the Ombudsman ruling in our favour.
- I have returned to the Ombudsman this week but their backlog is such that I'm anticipating it could be months until they revisit it
- I have escalated to the Bank to try and resolve but I'm not hopeful. 

I realise that this is quite a unique situation but any precedents or advice that anyone is aware of would be very welcome indeed.

Hope you can oblige?

housebuyer143

Cut your losses and go to another lender and get the money. Then complain to the ombudsman. 
I know you want the cheap rate but if it's have no money to finish the work or pay a higher rate and get it I would be going with the latter.

ACG

The one thing you have missed is probably the most important... Why did they refuse the application?

I am guessing not, but is the property habitable? If it is, raise a mortgage with a different lender. 
Failing that, how long/much do you need to get it habitable (not finished, just to the point where you can secure a mortgage)? That should be the priority, you can argue the rest at your leisure once your family are in their proper home and you can do the rest once the mortgage comes through. 

Hoenir

Unusual for the Financial Ombudsman to overturn a commercial lending decision and force a lender to advance a mortgage. 

How much is the advance you applied for? Home improvements are generally regarded as refurbishment not major structural alterations i.e. remodelling. 

What spurious reasons did they provide for declining the application?  

Starting the works before you had the necessary finance in place is unfortunately not the lenders fault. However much you complain. 

nunntrev

Thanks for your comment ASG . As indicated, the bank refused on the grounds that the underwriter said that they “will not lend on an after works valuation”. This is despite the underwriter insisting on the after works valuation in the first place. The property is not habitable. 

nunntrev

Thank you for your comment Hoenir.

the background for the original refusal was that RBS advertised a 5 year fix at 3.1% in July 2022 for properties energy rated A or B. My house was rated C but the works to the house were intended to get it to A or B. I enquired whether this would make me eligible. The bank confirmed that it would. They then took 6 months to reach their decision and advised that they wouldn’t lend as it was not A or B rated. By this time, their 5 year fix was 5%. The ombudsman determined that the audit trail proved that they had agreed that I was eligible at the outset so should honour the original rate. Had the mortgage been approved when it should have, I would have subsequently started work and the house would at some point in the works been uninhabitable in any event. When I first applied, they valued the house at £1.8m. The house is currently uninhabitable but they have given an after works valuation of £2.05m. I am seeking to borrow 500k.

[Deleted User]

nunntrev said:

Thanks for your comment ASG . As indicated, the bank refused on the grounds that the underwriter said that they “will not lend on an after works valuation”. This is despite the underwriter insisting on the after works valuation in the first place. The property is not habitable. 

I though this was standard protocol on non habitable applications ? 
@ACG and the other expert members have said this often.

nunntrev

The bank has not said anything about if not being habitable or not and we could make it officially “habitable” if that were the issue by finishing putting in the windows and a basic sink and loo. It has a roof, electricity and running water. However, the bank has not elaborated on its reasoning beyond it won’t lend against an after works valuation despite they insisting on it in the first place.

nunntrev

Just to add, we lived in the house for 10 years and up to the first valuation and it has only become uninhabitable in the last 3 months while we removed key elements for improving, 

housebuyer143

Why don't you apply somewhere else? You might need to make it habitable as in a basic kitchen and obv windows but then fight this when your not freezing, without a house to live in? 
If it were me I wouldnt have spent 18 months trying to secure this mortgage and the stress associated with it

 

amnblog

You are banging your head against the wall with RBS however aggrieved you may be.

It sounds like with a currently un-inhabitable property you need a specialist lender before you move to a permanent one.

Speak to a good Broker that has some experience with self build and development.