Mortgage declined - debt to income ratio too high even with guarantor

ach45

Could someone help me understand guarantor mortgages? I am applying for a £50k mortgage. I have a large (85%) deposit and a guarantor. I am being declined due to high debt to income ratio. Presumably lenders think I might not be able to pay my mortgage because of other debt repayments? But isn't that what the guarantor is for? I'm confused.

TheSpectator

Couldn't you have just added this to your existing thread so there is some context.

Incidentally, you had a 95% deposit the other day?

kingstreet

Presumably you have applied "joint borrower, sole proprietor?"

The helper is there to assist the lender with payments in the event of your inability to pay. It's supposed to be a last resort as lenders don't want the expense of invoking the guarantee. It doesn't overturn credit issues which remain an integral part of the initial checks.

ACG

Also there will likely be a concern as to why you have so much debt, are you living beyond your means? (Im not looking for an answer btw, just a question the underwriters will be asking themselves). 

teaselMay

Is this a different mortgage to the 20K with 95% deposit one?

Hoenir

Are we getting the full story behind the sizable deposit and now the guarantor ?  There are may well be other complexities that are concerning lenders from the outset not just the level of indebtedness. For the amount of money being borrowed. There's too much potential administration cost for the return on lending the money. 

ach45

Thanks for the replies. I apologise if I should have added this to a previous threads. I thought that was potentially confusing as this was a specific question about guarantor mortgages.

The reason I've talked about different figures is that there is more than one way the purchase could go ahead. The figures mentioned here relate to the application which was turned down when I spoke to a lender today, so I thiught it was pertinent to quote them.  It's not my intention to be waste anyone's time. I'm grateful for the advice.

ach45

Hoenir said:

Are we getting the full story behind the sizable deposit and now the guarantor ?  There are may well be other complexities that are concerning lenders from the outset not just the level of indebtedness. For the amount of money being borrowed. There's too much potential administration cost for the return on lending the money. 

The deposit is a gift from parents (both over 75) and the guarantor is my sibling. That's the full story, unless I'm missing something obvious 

MWT

ach45 said:

Actual personal debt is £4k (overdrafts and credit card)
In the business, £300k (with £500k of assets)

This is the problem, you have income of £5,000 PA from the business and additional income from employment of £10,000 PA, and even if we ignore the business debt you already owe £4,000, and now you want to borrow another £50,000 so it isn't hard to see why the lender is concerned as they have to believe that you can actually repay it even if you have a guarantor..

The business side makes no sense at face value and will be raising a serious red-flag...

If you take your numbers as being accurate then why wouldn't you just sell the assets, repay the debt and you'd have £200,000 cash in hand or roughly 40 years worth of your £5,000PA, and no need for a mortgage (tax may or may not be payable of course...)

If you can't actually sell those assets for £500k then they are not actually worth £500k even if that is what they cost you to accumulate...

Hoenir

ach45 said:

Hoenir said:

Are we getting the full story behind the sizable deposit and now the guarantor ?  There are may well be other complexities that are concerning lenders from the outset not just the level of indebtedness. For the amount of money being borrowed. There's too much potential administration cost for the return on lending the money. 

The deposit is a gift from parents (both over 75) and the guarantor is my sibling. That's the full story, unless I'm missing something obvious 

Will your parents reside in the property that's to be purchased?

400ixl

They will view the guarantor as the absolute option of last resort, so they will still want to be 99.9% sure they will not have to go down that route.

If they can't be that sure they will not want the risk.