Will these old debts affect our mortgage application?

hugsandpugs

Hi,

So we’ve gone to a financial advisor to get help with buying a property. We would be looking at paying around a 75% deposit upfront for the house and then getting the rest via a mortgage.

The best rate he’s found is with NatWest so we had a mortgage in principle off them and our offer got accepted on the house. Fast forward to him making the mortgage application and they’ve asked for bank statements which shows two very old debts 9 years + that I’ve been paying off over the last few years. The underwriter is now questioning these.

Whats the chances that our application gets rejected because of this? 

Worried this is gonna mess our chances of getting a mortgage at a decent interest rate. 

Also, both of the debt collection agencies have recently offered me settlement offers of 60% off and then it will show as partially satisfied? Is this something worth doing or would I potientally need to pay them both in full for us to have half a chance of getting this mortgage?

combined they are £1482ish and with the settlement offers it would be around £587 to clear both off as partially satisfied.

Im assuming they’re not on my credit file at the moment as nothing has been mentioned about them until they’ve looked at the bank statements.

Any advice would be appreciated - we are first time buyers! 

Isthisforreal99

Why didn't you clear the debts prior to mortgage application? With a 75% deposit surely you had the funds to clear such a low value debt.

Brie

debts that old won't show on a credit report so you're right about them not being a concern until the payments were seen on the bank statements.  I'm assuming you're willing and able to pay the offer amounts?  If so then I would suggest you ensure you get a acknowledgement of them being cleared and show that to the underwriters.  I would guess that that with your relatively low LTV will swing things in your favour.  

hugsandpugs

Isthisforreal99 said:

Why didn't you clear the debts prior to mortgage application? With a 75% deposit surely you had the funds to clear such a low value debt.

My husband has literally only just had inheritance through otherwise we would have. We were not in a position to clear it before 

hugsandpugs

Brie said:

debts that old won't show on a credit report so you're right about them not being a concern until the payments were seen on the bank statements.  I'm assuming you're willing and able to pay the offer amounts?  If so then I would suggest you ensure you get a acknowledgement of them being cleared and show that to the underwriters.  I would guess that that with your relatively low LTV will swing things in your favour.  

Yes we can pay them both off now, either the settlement offers or the full amount in worse case scenario. Would I be impacted more by accepting the settlement amounts rather than just paying the full amount though? Or does it not matter? Our financial advisor has written to the lenders to say we are willing to clear the debts 

Brie

I'd wait and see what they come back with if your FA has already told them.  It may be that's all they need.  I had to do similar with my CC debt when we last got a mortgage. 

Hoenir

I'd simply get on with clearing them now. Historic debts that take years to pay off. Provides  lenders with a view as to how people manage their personal finances, i.e. why bother paying it off when it's an interest free loan. 

hugsandpugs

Brie said:

I'd wait and see what they come back with if your FA has already told them.  It may be that's all they need.  I had to do similar with my CC debt when we last got a mortgage. 

Yes I’ll see what they say. Hoping we can do the settlement offer tbh but does this negatively impact future credit? They said it would show up on my file as partially satisfied

Isthisforreal99

Just clear the debts, you can afford to. How do you think it looks to a potential lender that someone has the means to clear a relatively small debt but doesn't. Is it really worth potentially losing a mortgage offer over.

Hoenir

hugsandpugs said:

 Fast forward to him making the mortgage application and they’ve asked for bank statements which shows two very old debts 9 years + that I’ve been paying off over the last few years. The underwriter is now questioning these.

Meant also to say earlier. Financial relationships are built on trust.  Doesn't look good that your mortgage advisor nor yourselves openly declared these debts when submitting the mortgage application. Immediately raises the question are there other matters intentionally being kept in the dark and out of view. While underwriters are granted discretion they still have to operate within internal policy guidelines. 

hugsandpugs

Hoenir said:

hugsandpugs said:

 Fast forward to him making the mortgage application and they’ve asked for bank statements which shows two very old debts 9 years + that I’ve been paying off over the last few years. The underwriter is now questioning these.

Meant also to say earlier. Financial relationships are built on trust.  Doesn't look good that your mortgage advisor nor yourselves openly declared these debts when submitting the mortgage application. Immediately raises the question are there other matters intentionally being kept in the dark and out of view. While underwriters are granted discretion they still have to operate within internal policy guidelines. 

Tbh I just didn’t think at the time because they are just old ones that come out of my account at £1 a month I instantly just thought to mention the recent ones like bank loan for a car, credit union loan etc