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Mortgage offer letter
juventino1
Posts: 154 Forum Member
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My cousin received a mortgage offer and in one of the conditions they asked him to pay his outstanding loans within 30 days of completion and never to take any more loans out.
He is confused since he is in a good job and his wife is in a very good job, their credit score is high and their loans are minimal compared to their salaries and they are only asking for 78% LTV which i believe is quite good...
Any ideas why the bank has inserted this clause and any advice when contacting them about it? He is thinking of calling it a day with them and just back out of this arrangement.
Thanks
He is confused since he is in a good job and his wife is in a very good job, their credit score is high and their loans are minimal compared to their salaries and they are only asking for 78% LTV which i believe is quite good...
Any ideas why the bank has inserted this clause and any advice when contacting them about it? He is thinking of calling it a day with them and just back out of this arrangement.
Thanks
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ETA Assuming this is a remortgage, are the existing loans secured loans?
but what loans would they be talking about?
what happens if he wants to buy a car in the future, say?
But are the loans for high enough amounts that they would be in difficulties if either job was lost?
Or you could just speak to the bank directly about it.
I have never heard of a condition stating that the applicants are to never take out a loan again ever (sounds very dramatic) How could they possibly hope to control that?
Which mortgage lender is it?
No, he has 2 hire purchase agreements but nothing registered against his home..
The exact wording are
" You must repay the following commitments in full within 30 days of completion of this Mortgage without taking on further Borrowing
Hire Purchase: XXXXX
Hire Purchase: XXXXX"
The only think I could find online was wording to the effect that the mortgage terms offered will no apply to future loan applications (i.e. re-mortgaging)
They are not of a high enough amount and even if you dont have loans and you lose your job you will be in big trouble anyway...
Woolwich... He spoke to the mortgage adviser and they said that this is for their affordability calculation and in 17 years in the business she never came across someone being checked after the completion.
Did they check up on you if you took furtehr loans later?
No they didn't.
But it doesn't say anything of the kind, does it?
As you later revealed, the mortgage condition reads :
This means what it says, i.e. that Woolwich expects these two hire purchase agreements to be repaid within 30 days of completion, without borrowing the funds to do so from another source.
My guess is that your cousin assured them that he was able to repay these HP agreements from his own resources, and Woolwich took this into account when assessing his mortgage application for "affordability".
How you have interpreted this to mean that he can "never take any more loans out" is a complete mystery to me.
a) you may not actually be able to and
b) there may be early redemption penalties
unless the Woolwich offer included extra borrowing to provide funds to do this?
He understood it as he has to pay those 2 agreements and cant take any further borrowing in the future if he needs to.. tbh i understood it as the same and not specific to those 2 agreements only.
I honestly dont know why the insistance on those 2 agreements to be paid... He is able to pay them off since they have checked everything and offered him the mortgage in the first place.
I think the wording of the offer suggests the money should be used for this purpose only and that they shouldn't take out further borrowing for debt consolidation.
If this is the case, the funds should go to the solicitor to distribute anyway, so it's not like they would end up in your cousin's bank account for him to decide whether to pay off the debts or go on a spending spree!
Without knowing the full circumstances, it's impossible to say with certainty, but it may be that the Woolwich's "affordability calculation" would only permit approval of the mortgage application if these monthly HP commitments were no longer payable.
(a) An HP agreement can always be repaid early (although this may indeed trigger a penalty clause).
(b) This isn't the Woolwich's problem.
Perhaps it did ? We simply don't know.
The wording of the mortgage offer (as provided by you) doesn't say this (the emboldened part), so I would suggest that he misunderstood - and so have you.
If the Woolwich have lent them extra funds to consolidate existing debts then they are within their rights to specify that this is done.
I suppose people ask for extra money for things and spend it instead and then need to borrow more money later, they are covering themselves by stating debts must be cleared without borrowing extra from elsewhere to do so.
Agreed.
I think the bits in bold means do not take on further borrowing *within the 30 days of completion of this mortgage*. That's how I read it anyway. So the OP is half right, yes you have to repay the loans and yes you can't take out further ones, but only in that 30 day period.