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

silvercar

MWT said:

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...

Farmers may not agree…farms worth £3m supposedly generate only 30k of income.

silvercar

It must be something more to this. The whole point of having another borrower is because the resident borrower doesn’t have sufficient income. I know of a few people where a parent has gone on the mortgage so their offspring can borrow a far greater amount than otherwise. 

MWT

silvercar said:

I know of a few people where a parent has gone on the mortgage so their offspring can borrow a far greater amount than otherwise. 

.. I suspect they didn't have a partnership with £300k of debt though...

This isn't about only managing to generate £5k profit from £500k assets, it is about having over £300k of debt and trying to borrow more...

I'm not sure there is a need to look a lot further for the lenders concerns.

ach45

Hoenir said:

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?

No, they won't be living in the property and will have no beneficial interest in it.