Will over run bank overdraft stop mortgage top up approval.

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stwome01

Registered User
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Hi.

I am hoping to build an extension on to my house. I was hoping to get a mortgage Top up of about 20000.

My mortgage is about 124000 on a house worth 150000. Original mortgage was 230000 eight years ago. I have about 13000 in savings.

Now the problem, due to some large unexpected bills recently I have overrun my bank overdraft on a couple of occasions. Do you think this will stop the top up being approved?

Wife and myself has stable jobs. Wife is part time.
Monthly income approx 4150 net. Not including children allowance (2) Outgoings 3800 includes everything. Being doing a budget for the last five years. So have all the details. We will have additional money available before we need to draw down the money as there will be no longer child care costs for one of the kids.

What are my options. Minimum I need is 16000. Does top up mortgage have to be with the same bank as the mortgage itself.


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Exceeding a planned overdraft is a huge red flag for the banks and will most likely stop the app in its tracks. They'll probably tell you to save for 6 months and not use the overdraft at all. Even when you have one at 0% interest, they don't like to see it being used.
 
Thanks ryaner for the response. I partially guessed that was the case.

Some other questions. can you apply for a top up mortgage after the work is done. For example if we got the money off our parents or credit union in the mean time can we then use the top up mortgage to pay back the other borrowed money?

Or could my wife apply for the top up mortgage on her own even though the original mortgage is in our joint names?

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Not sure on the top up mortgages but any application would have to be a joint one once you are married.
 
Thanks again Ryaner. Really appreciate the information.

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If you borrow another 20K you'd have nearly no equity, don't think the bank would go for that, unless the extension adds value.

Not a good idea to borrow from others if you were then refused the top up afterwards you wouldn't be able to pay it back.

Personal opinion of mine is that overdrafts are a very bad idea, particularly if they are long term, and even worse is going over the overdraft. You have savings so it was not necessary and now it means the bank will look more disfavourable on your application.

I've yet to see anyone do an extension that didn't go over budget. So budget that in.

If you fail with the bank, are you able to borrow the 20K from the parents and pay it off monthly? If they were agreeable to that of course. It's not a very large amount. Over say 5 years it would be about 330 a month.
 
Thanks again for the response.

The more I think about this the more P*ssed off with myself I am. This could easily have been adverted if I had been just a little more vigilant with my money after Christmas.

Anyway I am still hoping that it may work out. The build is not schedule to start until September. I'd have the money for the first couple of stage payments. I've taken steps to get my current account in order. By that stage I hope there might be an extra 6000 equity on the house. The extension should add to the value of the property Adding an additional 24 square meters and making the kitchen, dining room into an open plan living, Kitchen and dinning area.

Also, the mortgage over payment are now going into savings so savings should be in a better position by that stage.

I'm hoping to get pre approved for a loan as a backup plan. My parents said they are also good for the money but I would prefer not to go that route.

So I am still hoping the mortgage Top up will work. If not now then in 6 months time.

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One more question. Does loan approval = loan when applying for a mortgage Top up?

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I get on great with the recovery department of my bank.
I don't go near the local bank manager any more. The recovery department are the crowd to talk to about your extra money !!

In my opinion of course !
 
Well after having a meeting with the mortgage advisor yesterday I have to say all your comments where spot on. They said there wasn't enough equity on the house and they didn't like the overdraft overrun. So come back in 6 months and they'll see what they can do. They were happy with my saving pattern and seem to be open to the idea of paying off a term loan with a mortgage Top up at a later stage.

Thanks again for all your help and advice.

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