During recent years, the criteria to obtain a mortgage has become more stringent amongst lenders. One hundred percent mortgages are a thing of a past, although still available to people who have an excellent credit file, or who are borrowing a smaller figure.
To obtain a mortgage, most banks and building societies ask you to make a deposit, which is a specific percentage of the amount you wish to borrow. Generally, your lender (or solicitor) may ask you for further details on the deposit. Why do they want to check on how you obtained your deposit, especially since you have already met the terms and conditions of the deposit? Is it necessary, and if you refuse to assist the lender, could it backfire on your mortgage application?
Is the Money Fraudulent or Legitimate?
When your lender has received the deposit for the mortgage, the application is still pending. The next step is when your lender may ask questions about how you obtained the deposit, and you must show proof of this, should this ever occur. Keep a copy of bank statements, a photocopy of a counterfoil or cheque stub from the depositor, or a statement of account.
If you have obtained a loan to make the deposit, this may look risky to a mortgage provider. They will want to know the terms of the loan, including repayments, etc. Do you have a strong credit history? Have you ever missed a payment of a loan, credit agreement, or credit card? If yes, this can taint your credit file too and the last thing you want your lender to do is perform another credit check for the application.
What the lender is looking for from you is honesty. If you are able to prove how you have obtained the deposit for your mortgage, this will support your application. If your parents have lent you the deposit, invite your parents to the meeting where they can confirm this to the lender.
If you act cagey toward the lender when they ask you where the deposit has come from, they may believe that you have something to hide.
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Evidence to Show for a Mortgage Deposit
If you have savings, the lender will usually require a statement to show the full deposit amount. If the amount has been gifted to you from a friend or family, the mortgage lender will require a letter providing the name, amount, and the terms of repayment (if any). If a deposit is provided through a deed of trust, the gifter is living in the property to mortgage, or there is an equitable ownership in the property from a third party, this could damage the mortgage application.
An endowment policy is another way to obtain the monies for a mortgage deposit. If you use this method, the lender will require a letter from the provider displaying the amounts.
Inheritance monies can certainly be used on a deposit to fund a mortgage, but again the lender may require evidence of this in a letter or statement.
There is a Mortgage Lender to Suit All People and Circumstances
If you find that your mortgage lender pulls out of the application for one specific reason, do not be disheartened. There is a wide range of mortgage lenders and mortgage deals that may be suitable for your specific circumstances. Rather than going direct to one lender, it may be wise to speak to a mortgage broker.
A mortgage broker who has access to the whole of the market will be able to compare different deals and find the most suitable one for you, so you don’t have to make lots of individual applications – as this could damage your credit score by doing so.
If you believe that the lender’s decision is unfair, after you provided them with the information that they requested, notice if they included a fact sheet on the Financial Ombudsman Service (FOS) with their correspondence. You should initially take up your complaint with the lender, but all financial institutions must provide this fact sheet following a complaint. There is a six-month timescale from the issue of the complaint or discrepancy to refer it to the FOS. As they are independent and funded by the banking industry, they may uphold the decision in your favour. It is also possible to email or phone the Ombudsman for advice.
Although it is a difficult time to obtain a mortgage promise, many lenders can still help if you provide a good deposit amount. How you obtain that deposit is likely to come under scrutiny by the lender. If your solicitor is requesting this information after consulting with the lender, provide him or her with the necessary documentation.
Even if you have been forced to borrow the monies for the deposit from a lender, this does not necessarily mean that the application will be declined. All lenders vary with their criteria.
You may find it useful to speak with a mortgage broker – a broker deals with a number of different providers so rather than putting your faith in one lender, they will be able to tell you which mortgages are the most suitable for your circumstances and which providers are likely to accept your application.
Remember to always read the small print when searching for the best mortgage deals, it is recommended that you obtain mortgage advice from a professional.
Ensure that you have a chance to compare mortgages before you sign up with any lender. Each provider has their own interest rates, mortgage set up fees, and some may even offer a cash back facility and payment holiday (on occasions).
Use a comparison website to compare mortgages and obtain various quotes. Although it can be difficult to find the right lender for a mortgage, a comparison website saves time and still gives you access to the best mortgage deals.
The above post is intended to be informative but does not constitute advice – financial, legal or otherwise. Any opinions given are the author’s own and do not necessarily reflect the views of SO Media or the Mitchell Farrar Group.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.