New mortgage application - declined Halifax

Finance060319 · 20 July 2019 at 10:50AM

Hi All,

I’ve already gained some good insight from this forum but was hoping someone could provide some advice (comfort at a nervous time) on our specific situation please.

We have found and offered our our dream home! I hadn’t got an AIP as I was awaiting a final default to drop off my credit file this week - now my file is default free! We had appointed a mortgage advisor who is a family friend and has very good reviews and been in the industry for a long time. It was the mortgage advisor who advised us to wait. However upon application Halifax has declined our mortgage application which our mortgage advisor is now looking to appeal.

Just a little bit of info about mine and my partners situation.....

Credit scores (although I know these don’t mean a lot are around the 700 mark).
We have 19 active credit accounts - debt for these totalling around 25k. Range of credit cards, store cards and overdrafts. Percentage of used credit is 80% which is affecting score.
I have a £6,500 arranged overdraft which I live in.
We have two PCP car deals which show the full outstanding balances of the cars (£60k combined) with £880 monthly payments.
I stupidly took out a payday loan (don’t ask) in the last year and paid it off 14 days later!
We have no defaults or CCJ’s and no missed payments for last 3 years, couple of times overlimit on credit cards.

In terms of jobs we have both been with our employers for over 6 years with a combined salary of £150k.

We own our current home outright which was a ‘gift’ from our parents. We have decided to keep this and rent it so have equity of £350,000 in our current home.

The house we have offered on is £610,000 and our parents have kindly gifted us another £350,000 and our plan is to use £40k for stamp and solicitors fees and use £25k to pay off the store cards, credit cards and overdraft. The remaining £285k we will be using as a deposit.

So our question is, I thought we’d be in quite a strong position given our LTV and equity in our home. How likely is an appeal to turnaround the decision? Are there lenders that will lend to us?

We’re extremely nervous we’ll lose the opportunity to get our dream home which is most definitely affordable and we now realise the importance of a clean credit file and have been quite naive to it!

Any advice would be appreciated. Thanks for reading and looking forward to responses!

nowhereboy · 20 July 2019 at 12:32PM

Im not sure how to put this politely. You have a huge amount of debt once taking the two PCP vehicles into consideration (£85000), despite a big income you live in your overdraft and have had to rely on a payday loan recently. None of this paints a good picture to the lender and shows very poor money management.

You will need a fee charging broker, Im fairly sure halifax won’t lend to someone with recent payday loans so that may have been a non starter from the get go.

Money_maker · 20 July 2019 at 12:41PM

Without appearing rude, your parents haven't done you any favours by giving you such vast quantities of cash as you've never learnt how to budget like everyone else. Suggest you go to the Debt Free Wannabe board where they will advise how you can clear your debts, learn to budget and discover how to live with a £150k income which tends to be at least 5x more than many live within.

Finance060319 · 20 July 2019 at 1:00PM

Thank you, we will be sure to check it out. Not taken it as rude at all, appreciating any advice at the moment!

haras_nosirrah · 20 July 2019 at 1:05PM

Depending on the credit profile I am pretty sure we could place this.

The devil will be in the detail and mainly that payday loan
When was it taken out and when was it repaid?

Finance060319 · 20 July 2019 at 1:06PM

To be honest, we could clear around 50% of debt out of our savings and shares (not including the PCP’s). We’ve carried debt but still saved which seems silly now as we always knew we’d be in a position to sort it out if needed. Our car payments are excessive I agree but in reality our outstanding payments are only £30k and the remainder is balloon payments which we’ll never incur as we can hand the cars back as these are guaranteed future values. £900 on cars with an after tax monthly take home of £8,000 seemed ok in terms of %. £250 car loan wouldn’t seem too ridiculous for someone taking home £2,400 a month?

Finance060319 · 20 July 2019 at 1:10PM

The payday loan was for £500 taken in March this year and paid back in April (following month) at £632.

haras_nosirrah · 20 July 2019 at 1:15PM

ok - looking at criteria a number of lenders require payday loan to be clear 12 months. Have found one at 6 and others who say they will consider subject to overall credit profile (not time specified) so this would be one to get a full credit report for and get on the phone to some bdm's

There are lots of good things going for you namely income and equity but the payday loan is the biggest concern. They will want an explanation as to why you got it.

csgohan4 · 20 July 2019 at 1:23PM

Whether you think is reasonable is irrelevant. Lenders base lending on affordability and any debt will impact that.

generally can lend x4.5 on your gross income excluding debt

60K for 2 cars is expensive and lenders will not take into account the fact you will give the car in because that is not guaranteed and some people will choose not to.

Combined income of 150k but a high level of debt is worrying, you need to rein the spending in, clear the debts as that is what your failing on.

Finance060319 · 20 July 2019 at 1:33PM

Would you advise paying off the £85k so we’re debt free and putting in £225k deposit against the £610k. I don’t want to pay the cars off in the event we still won’t get accepted for the mortgage. Our MA has a meeting with Halifax BDM on Monday, will they be able to advise exactly why we haven’t met their criteria? I assume this will help our MA applying with other lenders? Our MA asked for lots of supporting docs before applying such as bank statements, pay slips and all three credit reference agency reports. Surely an experience MA would know we’d be declined before going straight for a Halifax application?

csgohan4 · 20 July 2019 at 1:46PM

Finance060319 wrote: »

Would you advise paying off the £85k so we’re debt free and putting in £225k deposit against the £610k. I don’t want to pay the cars off in the event we still won’t get accepted for the mortgage. Our MA has a meeting with Halifax BDM on Monday, will they be able to advise exactly why we haven’t met their criteria? I assume this will help our MA applying with other lenders? Our MA asked for lots of supporting docs before applying such as bank statements, pay slips and all three credit reference agency reports. Surely an experience MA would know we’d be declined before going straight for a Halifax application?

Is your Broker from an estate agent? paid broker?

New mortgage application - declined Halifax

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