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Original poster

to not pay off credit cards (mortgage related)?

56 replies

amadalily · 27/02/2019 13:31

Hi all, I need to know if I'm being incredibly stupid.

DP and I are moving house and had to take out a bigger mortgage (90% LTV and 4 times our salaries).
My salary will double by the end of the year. Financially we are secure and will have no trouble paying off the mortgage repayments (400 a month each)

However, to get this mortgage our mortgage adviser said we'd pay off our credit card debt (£6k). But we don't want to and we can't.
Our debt is all on interest free (mortgage lender doesn't look at it like that) and will be paid in full when interest free period is over (still 2 years from now!).
Our savings will cover the stamp duty, lawyers fee, etc. the extra £14k on top of the deposit (from the sale of our current place).

We are quite financially switched on, DP is an economist and I'm a Chartered Accountant.

HOWEVER, what will happen if we don't pay off the cards? Mortgage adviser said they won't ask to see a £0 balance but we must do it before completion. So how does this work?

Help

OP posts:
BlueSkiesLies · 27/02/2019 13:41

Often just take the debt off the total amount they are prepared to lend you, but not always.

justmyview · 27/02/2019 13:53

Mortgage adviser said they won't ask to see a £0 balance but we must do it before completion. So how does this work?

If the lender says that they will release funds unless the credit card is cleared in full, I wonder if they might do a credit search shortly before the date of completion. I think it would be risky to not clear the credit card debt and just hope for the best that the lenders don't realise

justmyview · 27/02/2019 13:54

Sorry for typo

If the lender says that they will NOT release funds unless the credit card is cleared in full, I wonder if they might do a credit search shortly before the date of completion. I think it would be risky to not clear the credit card debt and just hope for the best that the lenders don't realise

twinkle999 · 27/02/2019 14:00

Regardless of the finances you are most likely committing mortgage fraud if you say the balance is being paid off and then don’t pay it off( even if they dont check). Which is a stupid thing for a person with a professional job to do.

Original poster
amadalily · 27/02/2019 14:08

didn't even think about mortgage fraud, panicking now!
What if, per se, we paid off the credit cards using a balance transfer from another credit card - TECHNICALLY this debt is then incurred afterwards. It doesn't say we can't obtain credit from now onwards.

OP posts:
littlewoollypervert · 27/02/2019 14:08

If you clear the cards before completion, can you put new purchases on them afterwards, and still get the 0% interest rate?

So instead of using your savings for the stamp duty, lawyer's fee etc, can you put these on the card afterwards?

Jenb2104 · 27/02/2019 14:11

We had to pay our debt off in order to get our mortgage. It was a fairly small amount but they insisted. They did a credit check before releasing mortgage funds so I'm not sure you'll get away with not paying it.

ATBhinchers · 27/02/2019 14:12

9/10 applications they will do a further credit check before completion to see if you've taken out further debt etc. They may not ask for proof you've paid off the debt. But they may. Is it worth the risk? Is the application affordable if you don't pay the cards off? If it is then get the offer changed to say the card balances won't be cleared. I'm guessing it's only affordable if you do pay the off which is why the advisor keyed it that way.

You clearly aren't financially savvy if you think moving the debt from 1 card to another would be construed as "paying them off" don't drag yourself down into mortgage fraud.

For context I am a mortgage advisor.

Catinthetwat · 27/02/2019 14:14

Just pay them off.

Catinthetwat · 27/02/2019 14:16

*with the 14k

SassitudeandSparkle · 27/02/2019 14:16

You are saying you are a Chartered Accountant, and have lied to get a mortgage that costs a mere £800 per month for a 90% LTV Hmm

This seems rather unlikely.

KTCluck · 27/02/2019 14:20

I said I would pay off my small cc balance prior to the mortgage going through. I did, but then spent around £100 on one interest free card, which I was going to pay off in full at the end of the month. The mortgage company contacted the financial advisor to query it and were going to hold the mortgage until it was paid. So yeah, I’d imagine they won’t let you away with the 6k. They never specifically asked to see proof the cards were paid off by it must have flagged on a final credit check. I’d assume you’re going to have to pay it if they agreed to give you the mortgage on that basis.

SweetPeaproperty · 27/02/2019 14:20

Not paying off the credit cards effectively results in a breach of mortgage terms and conditions usually we ask clients to prove they have done this before we ask for mortgage funds from the lender - some lenders check - some don't but if they do check and you don't do it and your solicitor has requested the money then you are in breach of the mortgage and this could result in a CIFAS application being made by your lender (mortgage fraud) it would result in their withdrawing your mortgage whether or not you have exchanged contracts and could result in your never being able to apply for a mortgage again - that is the most drastic but is a possible/potential threat

propertyexpertadvi.wixsite.com/website

MyDcAreMarvel · 27/02/2019 14:21

They will do another credit check to ensure it’s been paid off. Taking out new credit with invalidate the AIP so you can’t do that either.

ATBhinchers · 27/02/2019 14:22

I totally missed what jobs you have!!
Can't even believe you're considering this. You could lose your job.

MyDcAreMarvel · 27/02/2019 14:22

*will

Original poster
amadalily · 27/02/2019 14:50

@Sassitude No, the mortgage adviser just did it to get the balance we needed and let us know after. But yes, ACA qualified. I'm good at preparing financial statements but have literally no idea about mortgages, the same way I have no idea about technical tax other than the 3 tax exams that I sat.

OP posts:
Original poster
amadalily · 27/02/2019 14:52

So, I am not going to consider doing it if it's actually a breach of the contract, this is what I'm trying to understand.

The issue is, in their credit check they picked up credit that was already paid off (just not updated). For example, my Experian shows that I owe more than my cards do as it was last updated 31 Jan. So I didn't realise this was an option.

OP posts:
Original poster
amadalily · 27/02/2019 14:54

Also I've not lied anywhere - I've not signed a form yet, it's all the workings of the MA to get us the best rate.

OP posts:
twinkle999 · 27/02/2019 15:03

Yes it is actually a breach of contract. Not sure you need technical knowledge. You know you shouldn’t really be doing this.

Trillis · 27/02/2019 15:29

We recently had something a little similar to this. The mortgage company originally said that we needed to have a nil balance on our credit card in order for them to release funds. When I asked about it, I was told that they do credit check people again shortly before funds are released. This was the 'default' option of the mortgage company.

I didn't want to do this as we put all our spending on a credit card and pay it off in full each month, so it never has a zero balance (always about £2k or thereabouts).

I was able to speak to them and they were able to reasses our application assuming we kept that as additional debt, so we didn't have to pay it off and could keep using our card as normal. However, we could have actually increased it. When they re assessed us to include the credit card debt, all that it said on our mortgage agreement was that we were not required to pay the credit card off. There was nothing in there about the amount.

So depending on your loan to value, you may be able to get the mortgage company to agree to let you keep the credit card debt. It's worth asking as your mortgage adviser may have simply gone with the default option and not actually asked.

Catinthetwat · 27/02/2019 15:58

If you think about it... If I was lending you money, I wouldn't be keen on the idea that you're spending more than you earn (6k more). If you can pay it off, that would reassure me, but if not, I might think it a bit risky.

You can't just lie to me though and pretend you've paid it off, so that I will lend you money.

Original poster
amadalily · 27/02/2019 16:01

@cat technically not spending more than I earn as I have savings. We buy holidays on credit cards for protection and pay off the right amount that it will be on £0 by the time the interest-free period ends. This means more of my salary goes into savings which has good interest. Overall my savings outweigh credit card debt. The issue becomes the huge stamp duty and solicitors fees that need to be paid off at the same time!

OP posts:
Original poster
amadalily · 27/02/2019 16:01

@twinkle well so far all I know is what mortgage adviser said, I don't know the wording of the contract because it's in the post at the mo.

OP posts:
Original poster
amadalily · 27/02/2019 16:02

Mortgage adviser also said
"you have to tell me that you're paying it off...they will not ask to see your credit cards with a £0 balance"

OP posts: