Undertaking to redeem debts as part of mortgage

kingpoultry

I'm in the process of buying a flat (105K with 5% deposit from parents). Originally I had a decision in principle from RBS, before they changed their FTB criteria. My broker advised me to apply for a Nationwide mortgage instead, which was marginally higher IR.

Received this week a letter from Nationwide saying they require me to undertake to redeem (pay off in full) my existing debts (2 cards, 1 loan, total c. £7500) within 1 month of completion.

Essentially, I have no means to pay off this month, and my broker's colleague (original broker off sick this week) has apologised that I wasn't warned in advance this might be required from Nationwide.

I'm stuck, and not sure how to takes things forward. Do Nationwide have the right to require me to pay these debts off? I hadn't asked for the money to do this!

All I can see now is more renting whilst attempting to pay off these debts (which are relatively low IR).

rdsmortgageman

Nationwide ask for this letter of undertaking to confirm that you will redeem within one month of mortgage going live. You don't have to have paid them off before funds are released.

kingpoultry

It was never my intention to pay off the debts (well, not from the loan, and certainly not within one month!). If I can't pay them off, I guess it's goodbye mortgage, goodbye conveyancing fees, goodbye flat?

rdsmortgageman

kingpoultry wrote: »

It was never my intention to pay off the debts (well, not from the loan, and certainly not within one month!). If I can't pay them off, I guess it's goodbye mortgage, goodbye conveyancing fees, goodbye flat?

Don't think you understood my last post. You don't have to repay before they release the funds. They will give you the mortgage funds. You buy the house.

mpsavuk

rdsmortgageman wrote: »

Don't think you understood my last post. You don't have to repay before they release the funds. They will give you the mortgage funds. You buy the house.

You need to clarify your post more. Are you suggesting they undertake to redeem the debts to get the mortgage accepted then renege on that undertaking once the transasction has completed?

rdsmortgageman

I have had cases like this with Nationwide in the past and was told by their mortgage centre that it is a requirement for the client to give them the letter, but they don't check as to whether or not they have been cleared off.

The poster needs to bear this in mind before he gives up a 95% mortgage with free HLC in the current climate.

homer_j_3

To the IFA

This site does not condone fraudulent activity.

Nor does it condone you to make direct reference to your business in the signature. Please read the forum rules - especially about signatures.

http://forums.moneysavingexpert.com/showthread.html?t=325378 http://forums.moneysavingexpert.com/showthread.html?t=305655

To the OP

If you decide to progress the mortgage and then fall into difficulty, it is likely that the lender will be less sympathetic as you have not abided by the terms and conditions of the mortgage. It will be very unlikely that you will be asked to prove the repayment of the loan but its the risk you take.

kingpoultry

rdsmortgageman wrote: »

Don't think you understood my last post. You don't have to repay before they release the funds. They will give you the mortgage funds. You buy the house.

Thanks, but I think we're both talking about different things (and apologies if I'm being really thick...)
Nationwide are lending me 95% value of the property (I have deposit 5%)
But Nationwide want me to agree to pay off my loan and credit cards within one month of lending me the mortgage.

But I won't have the £7500 to pay off the loan and credit cards!

homer_j_3

what RDS is saying is that there are no checks post completion to check that you have repaid the credit cards and loans.

If you agree to do this in the mortgage offer and then dont, whilst there will be no checks to see if you have done this, the consequences may come about in a random check or if you get difficulties then they may be less sympathetic

MarkyMarkD

You are being slightly thick, kingpoultry, but don't worry about.

Let me translate what rds is saying:

- Lie to Nationwide
- Tell them you will pay off the loan and credit cards
- Don't pay them off
- Hope that Nationwide won't check (because, almost definitely, they won't).

End of story.

Does that make it clear enough?

I am not condoning what rds is suggesting, merely translating to make it easier for you to understand.

As a matter of principle it is very bad to lie to someone who is lending you money to buy your home.

FraudBuster

Nationwide employees read public forums.