Fraud throws a span­ner in the works of our loan ap­pli­ca­tion

Yorkshire Post - Property - - PROPERTY - Franz Muelthaler

read­ers’ in­quiries on com­mon mort­gage re­lated is­sues. Q: My part­ner and I re­cently ap­plied for a mort­gage un­der my part­ner’s name. We had our ap­pli­ca­tion ap­proved af­ter the credit scor­ing process but af­ter­wards the lender found a prob­lem due to fraud. It looks as though some­body has ob­tained my part­ner’s de­tails and tried ap­ply­ing for some­thing in her name.

We had to com­plete a form for the bank and they are re­view­ing it with the board. I just do not un­der­stand what this means. If we have passed on the credit score, why should this af­fect our chance of get­ting a mort­gage? We have ap­plied for my part­ner’s record from Equifax.

Is there any al­ter­na­tive for us? A: It is vi­tal that you both re­solve this at the ear­li­est op­por­tu­nity, and I’m glad to see that you are tak­ing the right steps. If this is­sue isn’t ad­dressed, it will af­fect ev­ery ap­pli­ca­tion that you make for credit, even for items as ba­sic as, for ex­am­ple, buy­ing a mo­bile phone on a con­tract.

Fraud­u­lent trans­ac­tions of­ten ap­pear on re­ports com­piled for in­ter­nal bank use, and not avail­able to mem­bers of the pub­lic. I sus­pect that this is what you have been asked to clar­ify with your bank.

Vir­tu­ally all len­ders will use ei­ther Equifax or Ex­pe­rian to check credit ref­er­ences, so you are wise to have ap­plied for a copy of your part­ner’s records. If these prove to be in­cor­rect, you can ap­ply for them to be cor­rected.

Be­cause this will take some time to cor­rect, my sug­ges­tion at the moment would be for you to ap­ply for a mort­gage to your cur­rent bank, which will hope­fully be more sym­pa­thetic to your present sit­u­a­tion. Q: A friend of mine in­sists that a mort­gage lender has of­fered her a mort­gage that in­cor­po­rates her ex­ist­ing en­dow­ment pay­out.

Her en­dow­ment is due to pay £17,000 in 10 years’ time and she re­quires £80,000 to pur­chase her new prop­erty. The lender has told her it can of­fer her an off­set mort­gage and if she agrees to hand over the full amount of her en­dow­ment at the end of its term, they can off­set it from the start of his mort­gage so she will only have to pay £63,000 from the start. Is this pos­si­ble? A: I think that there might be a slight mis­un­der­stand­ing here, as I haven’t come across any lender that will agree to off­set in­ter­est us­ing an en­dow­ment pol­icy, in­stead of cash.

From what I can tell, the lender will have agreed to ad­vance

If this is­sue isn’t ad­dressed, it will af­fect ev­ery ap­pli­ca­tion you make for credit.

£17,000 of the loan on an in­ter­est only ba­sis, the cap­i­tal el­e­ment of which will be re­paid when the en­dow­ment ma­tures. The re­main­ing £63,000 will be re­paid on a cap­i­tal and in­ter­est ba­sis. Q: We are hav­ing trou­ble find­ing a mort­gage for an older (1950s) wooden house. Do you have any ad­vice? A: The ba­sic rule is that a prop­erty is re­garded as suit­able to mort­gage by the lender’s sur­veyor or val­uer, and not the lender. As such, you need to per­suade a sur­veyor that the home will form ad­e­quate se­cu­rity for a bank or build­ing so­ci­ety to lend money on.

Ba­si­cally, the val­uer needs to be con­vinced that, if you were to de­fault on your re­pay­ment obli­ga­tions un­der the loan, the lender would be able to re­pos­sess, and sell the prop­erty or as­set to re­alise suf­fi­cient funds to dis­charge the out­stand­ing debt.

With this in mind, you would be wise to talk to a qual­i­fied char­tered sur­veyor be­fore ap­proach­ing a lender, to as­sess whether the prop­erty is mort­gage­able.

Hav­ing said that, you will stand a bet­ter chance of ob­tain­ing a mort­gage if the loan to val­u­a­tion ra­tio is lower – ie, that you are con­tribut­ing a larger de­posit – as this places less of a risk on the lender. Q: I have a house which has ap­prox­i­mately £45,000 eq­uity in it. I wish to re­lease this to pur­chase a prop­erty from auc­tion to ren­o­vate and sell on. The only prob­lem is I have just moved into this prop­erty from an­other area of the coun­try and I am be­tween jobs.

Is there any way I could raise this money with­out be­ing in a job be­cause I wish to con­cen­trate on the new ven­ture. Any ad­vice would be greatly ap­pre­ci­ated. I have £7,000 in a sav­ings ac­count also. A: Most len­ders will need to see some form of in­come from you, to act as proof of your abil­ity to re­pay the mort­gage se­cured on the prop­erty.

This can ei­ther take the form of in­come from a job or from in­vest­ments.

How­ever, the good news is that, if you are just start­ing a new job, you can in cer­tain cir­cum­stances, some­times use your job of­fer or con­tract of em­ploy­ment as proof of your earn­ing ca­pac­ity.

Franz Muelthaler is mort­gage ad­viser at Wake­field and Dews­bury-based prop­erty spe­cial­ists Hol­royd Miller. www.hol­roy­d­

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