Problems - top up loans?

E

Emily123

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We have a mortgage of about 100k on a 450k house with a building society. We have had a mortgage for the last 10 years and have never missed a payment. For the last 3 years we have been voluntarily paying an additional 350 per month extra which has brought the term down quite a bit.

Over the last 2 years my husband has had problems with his business, mainly as a result of his father being seriously ill for a long while (he died a year ago), and he found it difficult to focus on the business, especially with being regularly called to go to the hospital halfway across the country every time his dad got bad. He has been paying catch up for some time but as a result has defaulted on one or two loans/leases which could have resulted in him getting a bad credit rating.

We decided to get a 25k top up on our mortgage to pay off the loans and make our monthly outgoings well within our means. We were going to drop our additional 350 a month by the 150 for the topup so we wouldn't have any extra to pay each month. We thought, given our good record with the building society and the fact that we have been voluntarily paying extra, that this would not be a problem. How wrong we were!!!

The problem seems to be that they base their decision purely on a proven income and nothing else. It is difficult to prove any salary for my husband, other than a letter from his accountant. I went on a 3 day week a while ago, using parental leave so since I am still officially "fulltime" I thought they would base it on my confirmation from my employer of my fulltime salary - but no, they base it on my last 3 months earnings which is 3/5 of my normal salary. I've told them I'll be going back fulltime but that is not considered. The other problem seems to be that in order to get a topup you need to pretend that you are actually getting work done on the house - so we got a quote for 17k of the 25k and said we were using the rest to pay back the loans - but then they consider the loan/credit card repayments as part of your monthly outgoings and will probably refuse the loan as a result of these payments!!

Everywhere I look these days the advice seems to be to consolidate your loans, using the equity on your house. But when it comes down to it, it doesn't actually seem to work out that way.

We have plenty of equity and a good record, neither of which seems to be even taken into the equation. The other annoying thing is that based on the building society's mortgage affordability calculator we would be able to get a mortgage of 230k if we applied as a new customer (based on 3/5 of my salary and a very basic salary for my husband), yet they may refuse us 25k which would only bring us up to a total of 125k. It doesn't make sense.

All this is before they even do a credit check - which could be another problem.......

Has anyone any advice to give? If they do refuse us, is there anywhere else we can go - eg for an unsecured loan?
 
You could go to a new mortgage provider!! Why don't you contact ICB and get a credit check done yourself just to put your mind at ease?
 
I'm a bit confused by the original post. Perhaps you can clarify specific details such as your means (average or actual monthly net income), outstanding (business) debts, mortgage rate, normal repayment, normal monthly outgoings etc. etc. The narrative above sets the scene but confuses some of the issues in my opinion.
 
The other problem seems to be that in order to get a topup you need to pretend that you are actually getting work done on the house
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This is not correct, you need to confirm to the lender that the funds are to repay existing borrowings. whoever informed you of this is wrong

Everywhere I look these days the advice seems to be to consolidate your loans, using the equity on your house. But when it comes down to it, it doesn't actually seem to work out that way.
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Equity in your home is a requirement in order to increase your mortgage facility, but affordability is they key criteria that must be met.

The equity in your property is irrelevant if your income does not support repayments on the higher mortgage facility you are seeking.

Having said that your current lender seems unhelpful and inflexible, so you should consider remortgage with another lender.
 
Molly said:
This is not correct, you need to confirm to the lender that the funds are to repay existing borrowings. whoever informed you of this is wrong
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Also - you cannot claim owner occupier mortgage interest tax relief on money borrowed for purposes other than purchasing or renovating your PPR. If you do get a topup for paying off loans etc. then you cannot claim tax relief on the interest on that amount.
 
This is not correct, you need to confirm to the lender that the funds are to repay existing borrowings. whoever informed you of this is wrong
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Are you sure this isn't applied when you take out a mortgage with a different lender who wants to ensure that any previous mortgages taken on the property are paid off?? I have to say I always thought that top up mortgages were granted for repairing or updating a property, not to pay off credit cards etc.

TRS information above is correct also.
 
Both Bank of Scotland and PTSB offer mortgages/remortgages to self employed applicants whereby the confirmation of income is an accountant's certificate confirming that they are good for the repayments of €X on a mortgage of €Y over Z years. The maximum advance in either case is 75% which is much more than you require. Also clearing debt is perfectly acceptable as a reason for a remortgage or top up as long as there are no missed payments.

Emily123 - you are being given the run around. Talk to a good broker.

Sarah

www.rea.ie
 
This is the letter of servicability isn't it Sarah? I thought BOS were phasing that out. Anyway the Institute of Chartered Accountants have told their members not to oblige.
 
Thanks everyone for your answers so far - keep em coming! Can you please explain what a letter of serviceability is and what the acct needs before he'll give one? Our accountant has provided a letter stating a predicted earnings amount of 25k for the year - my husband does make more than that but his accounts aren't up to date so we thought it would be best to keep it low since we couldn't prove it, and we thought they would base it on my fulltime salary of 50k rather than on my current 3/5 amount.

Clubman the rough figures are as follows:

Me - gross salary 50k fulltime - currently temporarily working 3/5. also have bonuses etc 6k (not prorated).
Husband - salary 25k as described above.
Mortgage - 100k over 25 years, 8 yrs ago. Actual reqd payment approx 700, currently (for last 4 years) paying 950 p.m which has brought the term down a few years. Also got a topup 3 years ago of 15k over 10 years, actual payment 150pm have been paying 350pm and have only a few months left in that as a result. If we get the new topup of 25k over 20 years the monthly amount is 150pm so we intend to drop the above mortgage overpayment by 150 pm so we don't have to pay any more than we're currently paying.

Borrowings: carloan 11k, monthly cost 500pm
Credit card 1 - 2500
Credit card 2 - 6000
Overdraft - 2000
Also have a business loan 10k which we intend to pay off but since this was in a company name we have not yet disclosed it to the building society.

I don't care about claiming the tax back on the topup, if I thought we could get the topup purely to payback the loans I would do this but I was told it had to be for improving your house.
 
Emily - given those set of circumstances the lenders will be falling over themselves to sort you out. Has your husband checked his credit history on the ICB? If not I would suggest he/you do ASAP as any unpaid loans or leases will need to be explained however given the sad situation with his father and your history of overpayments I would think you'll be fine.

Sarah

www.rea.ie

P.S. www.icb.ie or call 26000388
 
A letter of serviceability is basically a statement from your accountant that he believes you can repay. Therein lies the problem for the Institute. BOS have a particular format they wish to follow and an accountant submitting a statement of your profit/loss won't do. At least that was the case 2 years ago. I have been told that they are phasing this out but Sarah would know better than I.

I don't think you'll have any problems getting a top up though. Why don't you PM Sarah and see if she can help. She works for Rea and people on this site seem to find her advice extremely helpful/useful?

NB I have no association with Rea nor am I playing favourites!!!
 
Thanks guys. I feel a bit better about it now. They are to come back to us in a day or two to confirm (I think they are waiting on a credit check report) so we'll see then what the story is. If they refuse us I'll definitely contact Sarah.
If they have obtained a credit check are we entitled to ask for a copy of it? It would save us a week of waiting from the ICB if we requested it ourselves.
 
I think they're fobbing us off. They won't confirm whether or not they can approve it - it is over a week now since we applied.

I think we'll have to go ahead and get the credit check done and see if there's much of a problem.

Sarah (or anyone else in the know) - given our good paying history, if the credit check gives bad news about defaulting on a lease or a loan (not sure what it might say as don't know full details) - would this scare lending institutions off, or if we can explain about the difficult situation my husband had over the past few years do you think they would accept it? It is the fact but would be impossible to prove.
 
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