refused mortgage - best approach

Was wondering if anyone could help.

B/f and I have been trying to get a mortgage to finish a house that he had built with another girl 3 years ago, basically it was just a shell when they split up and he never did anymore with it. He got his own mortgage at the time and paid her off.

Anyhow b/f is self employed and in construction industry. Turns out now we cant get a mortgage to finish the house because on two occasions he lodged a cheque to cover his mortgage but cheque hadn't cleared when bank went to collect the money, for eg. mortgage due the 18th and he lodged cheque on the 16th taking 5 days for cheque to clear.

I know he was careless but he has no arrears just these two months where cheque wasn't cleared on time.

Anyhow we have been tipping away at the house for the last 5 months doing bits and pieces and now we cant get a mortgage to finish it because of these payments. He explained to the bank today that there are no deeds for the house because its not finished, engineer wont sign off without x amount of work being done. So he cant finish it, its no good to anyone without deeds technically speaking ? Am I right in saying this.

Anyway, I earn 40K a year, he's mortgage at the mo is 170K, we want to borrow 250K now in both names. House is valued as it stands at 300K. But because of these payments, no way.

If we offer to pay 12 months mortgage upfront, and continue to pay mortgage each month for the next 12 months also, does anyone know if they'd consider giving us the mortgage?

We both have excellent credit history only for these payments.

I think it may have something to do with current climate, I also work in Construction Industry.

Is there a way out of this? Oh and on top of that i am renting a house and paying 750 a month, he's mortgage is 820 so technically speaking we can afford the mortgage.

Gonzo.

You'll probably have to go with one of the "sub prime" lenders till you get a better credit history if the mainstream lenders have refused you. (GE Money or Springboard) You will probably have to pay a higher rate than with the "normal" lenders. Probably best to talk to a Mortgage Broker.

how much more would be required to make the house 'liveable' ?

definetly 60K we were going to finish lawns and driveway but could do without that at this stage. I've been onto smart mortgages and even there saying its bleak given current climate.

Gonzo123 said:

Anyway, I earn 40K a year, he's mortgage at the mo is 170K, we want to borrow 250K now in both names.

Click to expand...

Is €40K gross? What does he earn? Any other debts/savings?

House is valued as it stands at 300K. But because of these payments, no way.

Click to expand...

So it's not actually worth/valued at €300K at all?

If we offer to pay 12 months mortgage upfront

Click to expand...

Why would you do this? Why would you not just use money available up front to improve the finish of the house towards completion?

Oh and on top of that i am renting a house and paying 750 a month, he's mortgage is 820 so technically speaking we can afford the mortgage.

Click to expand...

€820 p.m. on a €170K mortgage sounds like a 40 year mortgage! Is that correct? Can you not live in it as it stands and "save" the €750 p.m. rent?

If you do join him in buying/finishing this property then as an unmarried couple you need to put a legal agreement in place in case you split up.

Q1. 40K is gross and he earns about 30K plus cash jobs.

Q2. "But because of these payments no" (meaning late) this referred to us not getting a mortgage, nothing to do with the value of the house.

Q3. 12K upfront was to try and get the mortgage ! Thats why we would do it, it wouldn't even come close to finishing the house. And its not ours to begin with, he's parents offered it so we could get the mortgage.

Q4. there is only 165 drawndown on his mortgage and it is over 35 years.

Q5. If we could live in it do u honestly think we'd be paying 750 a month rent? NO its not livable.

I am aware of the legal risks involved also should we split up, thanks.

The way I look at it we can continue to pay rent of 750 and he's mortgage of 820, no problems, we are not having any problems paying them, but surely it made more sense to pool our money and have a house of our own, thats why we want to try and finish it.

Thanks for your advice?

Gonzo123 said:

Q1. 40K is gross and he earns about 30K plus cash jobs.

Click to expand...

Do you mean tax evading nixers offering cash in hand?

Q5. If we could live in it do u honestly think we'd be paying 750 a month rent? NO its not livable.

Click to expand...

You were originally thinking of doing the garden and driveway so that suggested to me that it might be habitable even if it was rough.

buy a really cheap caravan , live on site .... 750 a month buys a lot of building material....

Jhegarty

Thanks for your suggestion ! May be only option to go with ;-)

Clubman,

I posted here looking for best approach to handle this, once again I will thank you for your sound advice tho I'm struggling to see which part of it will actually guide me in the right direction.

Gonzo.

As in many, many cases it's necessary to elicit somewhat more detailed information before useful suggestions can be made.

What work is needed to make it habitable ie having one bedroom, bathroom and kitchen for you to get going? And how much money would this work take? You could look for that amount first then move in and chip away with the 750 your paying in rent.
Also it must be a very big house with lots of expensive features if 165k has been spent on it already and it's still not habitable. Was some of the money borrowed used for something else??
If you are both in the construction industry you should be able to get good quality workers at very good rates in the current climate to finish the place/make it habitable.

Also I take it you have shopped around with other banks/financial institutions and not just with the current lender.

Friends of mine moved into a house with no stairs and no heating. I felt bad for them and we finished the plumbing and heating quick smart so they would not frezze. I assume you have no children. As ye both work in construction can ye somehow get the house to a dry state so ye can move in? Beg, borrow and all that.

By the way - my point about tax evading cash in hand nixers is very pertinent since the distinct possibility of being landed, at some point in the future, with a demand from Revenue for outstanding tax on undeclared earnings could well impact your ability to service any loans. Better to regularise your tax affairs and keep it that way.

Hard to understand that two outstanding payments, which were eventually made, seem to have jeopardised a whole financial life for this person. All appears a bit dramatic. Like one previous poster suggested, surely there is one room (en suite) and kitchen that are liveable while the overall trauma is resolved!!

"He explained to the bank today that there are no deeds for the house because its not finished, engineer wont sign off without x amount of work being done"

What do you mean by there being no deeds? Also exactly what will the engineer not sign off because you said there is a 300K value at present? Where did you get that valuation from.

Whose name is the property in? Why is the drawdown 165 when the mortgage is 170. You say you want 60K but 250 - 170 = 80K. When he paid off the girlfriend do you mean he used the mortgage to pay her off implying that 165 was not actually spent on building the house. You need to clarify what you mean by the house being a shell. When approaching a bank you have to look at it from their point of view, missed payments, dodgy ownership issues (previous girlfriend) and now another girlfriend with no ownership, 2 jobs in construction (layoffs). A broker may be able to help you navigate this.

I don't believe that the two late payments have skewed everything, - i don't believe that the banks will turn down business just because of this (perhaps the banks are much stricter than what i think). Did they actually say the two late payments were the reason? - or is it your assumption?

More likely the banks are looking at (declared, not nixers obviously) earnings and the fact he's working in the construction industry (given its current "issues") and basing their decision on that.

DeclanP said:

Hard to understand that two outstanding payments, which were eventually made, seem to have jeopardised a whole financial life for this person. All appears a bit dramatic. Like one previous poster suggested, surely there is one room (en suite) and kitchen that are liveable while the overall trauma is resolved!!

Click to expand...

What do you mean by there being no deeds?

Click to expand...

Agree. Who officially owns the land the house is on? I assume that the bank who did the original mortgage sought the title information.

Hi Gonzo,
Yes that is correct in relation to deeds, to some extent. "Title Deeds" means not just your Land Reg or Registry of Deeds documents proving ownership. In order to have a complete, saleable or chargeable set of Deeds you need to have your planning documentation in order too. That means that you must have sign off from the engineer on site, confirming that the works carried out are in compliance with building regs and planning permission.
And I absolutely accept that two missed payments can cause problems of this nature with credit ratings and future mortgages. A client of mine did exactly the same thing, and he has not been able to re-mortgage his property.
Gonzo you really are in a difficult position. To be honest, I think the best you can do at this stage is work really hard at getting some savings together. I know its difficult, but getting a mortgage right now will probably mean going to a sub-prime and paying extorionate interest, and possibly having to get a parental guarantee. As you both work in the construction industry, you are very exposed to the ongoing economic problems. I know it probably seems like things can't get worse, but if you take out a mortgage like that then lose your job and default, things will get much worse.
I strongly advise you to hold off, and re-focus on trying to put some money together to do the work over time.

Best of luck.

Kate.

Hi Everyone,

Thanks for all your replies, it would be impossible to answer everyone individually but here goes I'll try and address some of the posts.

Kate,

Thanks for your advice, we had a long chat last night and agreed that with the current economic state, we are not willing to draw such debt on ourselves, regardless of whether or not we get it.

We will try and finish the house to a livable standard, with help from our parents, didn't really want to do this but its good to have the option, just swallow abit of pride !!!

Some poster asked about his previous girlfriend being paid? No she wasn't paid out of the mortgage money, she was paid with money that he had saved over the years, so the mortgage money has not been spent on anything other than the house itself.

Clubman, b/f has tax clearance cert etc, in my opinion he wouldn't have got the loan in his name in the first place if there were any such issues, every bank will ask for 2 years accounts when applying for a loan when self employed. He's accounts are up to date, with cash in hand nixers, the majority of these cases are clients who wont pay VAT, want to deal in cash, tbh he would have to lodge most money into his account so tries not to deal in such things, but again with current situation its hard to turn away work no matter how you are being paid. I appreciate you wanted a bigger picture, thanks for your help.

In relation to the deeds of the house, the original lender have written several times looking for the deeds to b/f solicitor, the engineer would'nt sign off the house until all internal doors were in place, sanitary ware in place, footpaths in place, and their were maybe 10 snag items. We have tried to deal with these issues out of money we had saved to get the house signed off. The land and mortgage are in b/f name soley. The fact the the engineer would not sign off the house meant that no deeds could be passed to the bank. That is my understanding of it anyway ?

Anyway to cut a long story short, parents have agreed to give us some money to make it livable, we'll bide our time as Kate suggested and try and use the rent money to work on house bit by bit. We'll get there !

Someone asked if we had tried other institutions, we tried A*B but they wouldn't buy the original mortgage from UB, that was their only issue, apparently they have been stopped by HO buying out other mortgages, not sure if this is true but that was the excuse we were given.

In relation to the two missed payments, these were pointed out to us by A*B, b/f has his business accounts with them, they were willing to overlook these because could see that the money was lodged, but their hands were tied because of buying out original mortgage.

Kate, thanks again for your post, will take advice on board. For those who wished me best of luck, thank you too.

Gonzo.