Should I have declared this?

[stressingsusan]

Dp and I currently going through a mortgage application for our dream home. Provided wage slips, lots of other information and it's all been approved.

I have a loan between myself and a family member that I pay back monthly. It's about £400 a month. I didn't declare this on the application because firstly it's a private loan between family and there's no record of it. And also because when we move and our current house sells I will be able to pay them back in a lump sum so in theory it won't affect our mortgage repayments anyway.

Our advisor recently mentioned I need to provide a bank statement and I'm now worried that this payment will show up and be questioned. Should I have declared this earlier on? Will it affect the application if it comes out? I'm really worried now.

Yes, do tell another lie.

Say October was the final payment, tell the family member you'll need to stop payments for a month or two in order for the mortgage to go through and enable the lump sum pay off.

Literally lie through your teeth to your broker and everyone else and swear up and down that it's fully paid off now.

There's no way they can prove it and it's much less likely to impact you than saying there's still an active loan which may affect your affordability.

@MintMatchmaker

Our lender only wanted details of any finance that wouldn't be settled on or by completion.

Therefore it is not a give that the OP has made a false declaration.

That would be contrary to any major lenders practice in the UK. Otherwise everyone would just decide that they can pay X off by Y. I have never known any lender not to ask for full details off all current financial liabilities.

@Igfdyjxzyjkv the loan will be repaid when the current house sells. I can't say for sure when that will be. It isn't listed yet as we don't anticipate moving into the new house until at least Feb next year.

If there were an overlap we could afford it but once the house sells the loan will be gone.

I think it will be fine - if they query you can explain it is an informal loan. The bank will only be bothered about other lenders who have the right to get your money, I think, and the family loan is probably unenforceable so would be ok.
As long as you’re sure you can demonstrate affordability if it comes up then I wouldn’t worry.

Disclaimer: I am not a bank or a financial adviser, that’s just what seems logical to me. By nature I am a massive worrier and over thinker and I personally would not worry about this.

@BernieBaby

Yes, do tell another lie.

Say October was the final payment, tell the family member you'll need to stop payments for a month or two in order for the mortgage to go through and enable the lump sum pay off.

Literally lie through your teeth to your broker and everyone else and swear up and down that it's fully paid off now.

There's no way they can prove it and it's much less likely to impact you than saying there's still an active loan which may affect your affordability.

Never lie to a lender if you ever want finance again. Full and frank disclosure every single time.

@stressingsusan

Having spoken to dh they have access to all of his statements and activity already as he banks with them. However he is the main earner (earns 3 x more than me). As yet I haven't been formally asked to produce bank statements.

I'm wondering why solicitors have been instructed if so much is still pending?

You say this as if someone other than you instructed solicitors? What happened exactly?

I went through this recently, and when I contacted solicitors, they all wanted to know exactly what the situation was with the mortgage - whether we had a mortgage in principle, or a formal offer, or what.

We had our mortgage recently with HSBC. If you look at the intermediary info it says that debt that is going to be paid off within 6 months of completion doesn't need to be declared. So if your broker clicked it will be paid then it won't be used.

OP you're getting some really poor advice on here. Do not lie. Have a conversation with your broker tomorrow and be honest.

@ballsdeep

We had our mortgage recently with HSBC. If you look at the intermediary info it says that debt that is going to be paid off within 6 months of completion doesn't need to be declared. So if your broker clicked it will be paid then it won't be used.

This happened to us too, except ours was on completion.

I can't comment on whether the loan will be an issue but I can tell you that having any sort of mortgage offer doesn't mean they can't ask for more info at any point up until completion. We had a move fall through on completion day, just as our removals company had finished packing the van, because our buyers' lender decided do some further checks 'which may take up to nine working days' before releasing funds. Fortunately it all went through and we were able to move two weeks later but I was shocked to learn that lenders are able to do this right up to the last minute.

However, hopefully you will have a much less fraught experience. Good luck!

@stressingsusan

Having spoken to dh they have access to all of his statements and activity already as he banks with them. However he is the main earner (earns 3 x more than me). As yet I haven't been formally asked to produce bank statements.

I'm wondering why solicitors have been instructed if so much is still pending?

To get the ball rolling. Everyone wants to get the moving business started. If you waited for mortgage offers for the whole chain, it would take forever. That's why you have AIPs

We paid off our main mortgage in about 2017, in 2018 we took out a smallish £40k to do the kitchen and bathroom (finally) they even queried my coffee habit, so quite frankly it is up to you.

I’ve been through this several times (showing bank statements to a mortgage lender) and in my experience, they will ask about this. Some lenders will go through your statements and will query everything. It’s suggested before applying for a loan that you cut out any unnecessary spending from your account so that it looks more desirable.

However, you have a means of redeeming this loan, so hopefully they will look past it. If not, it can affect the amount they are willing to lend to you if you have extra debts. And £400 is a sizeable repayment.

@stressingsusan

The last thing our advisor said to me was that the only thing that would stop the mortgage going through now would be if the house valuations came back wrong - so if the bank deem the property to be worth significantly less than what we are wanting to pay for it.

We have done our sums. We know that we can afford the repayments even with the extra loan money on top. And we had a third of the asking price to put down as a deposit. So in theory we are in a fairly strong position but im just worried that the bank will withdraw or change the offer if this loan comes to light.

The fact you haven’t declared this extra borrowing would concern them more I imagine, than your ability to pay. You would have had to declare any loans on your application. You’ve lied by omission.

Also, a lender can withdraw an offer at absolutely any time. When I was in conveyancing, we had offers withdrawn even AFTER exchange of contracts.

@stressingsusan

Having spoken to dh they have access to all of his statements and activity already as he banks with them. However he is the main earner (earns 3 x more than me). As yet I haven't been formally asked to produce bank statements.

I'm wondering why solicitors have been instructed if so much is still pending?

Because you can instruct them without an offer.

For people saying tell the truth, it sounds all great, but it totally depends on the banks rules. Our monthly non obligatory child things were even deducted and that was 2 months ago. Most lenders will deduct it or want proof of next month's statement with no outgoing if not to include it.

If your family member will let you stop payments until the house is sold, then you could honestly tell the bank no more monthly payments are going out. Don't mention you owe more for a lump sum as its not relevant. Problem solved.

Don’t over think it. It comes down to affordability. If you can afford the payment even with that outgoing it doesn’t matter. Plus it will be paid soon.

Our broker didn’t look through our bank statements or ask any questions about it. They probably should have but they didn’t

This all seems very strange OP, are you in the UK? Usually the house valuation is the first step in the process before the mortgage is offered. You can get an agreement in principle without having to show detailed financial statements, but once the valuation is done then you’ll have to provide further proof of everything you’ve stated. I can’t understand how your broker is guaranteeing you you’ll get the mortgage when it sounds like things are quite early on in the process?

@stressingsusan hi op. Sounds like you have an agreement in principle (which is the first part). Which is great. It means based on all the info you have provided along with credit check all approved subject to valuation and all proofs.

You will need to declare it (as they will see on bs). But say no more payments due once completion goes through. But - Don’t worry. It will be fine. As long as they know no more payments due once you take out the new mortgage, then they don’t need to factor it in (because it’s not a cost you will have at that point).

Who is instructing the solicitor here?

It is normally the purchaser - IE you, and happens pretty early on in the process. Like the day after you have an offer accepted.
Then you start jumping through hoops, such as getting a valuation, mortgage and loads of information sharing and legal info.

Are you confused with the process?

Yes I am a bit confused. Is it that obvious lol.

The bank have instructed solicitors as they offer this service.

Obviously the loan will be paid off once the current property sells but I'm concerned that they might make completion of this property a condition of getting the mortgage which is a worry because who knows how long it might take to sell?

Just say it was for 4 months and it’s now been paid off. Then cancel the SO so if they ask for next month’s statement it won’t appear. Give cash instead for a month or 2.

Not to sound harsh but, however the loan thing pans out, you really need to make sure you understand the house buying process. To not know if you’ve had a mortgage offer isn’t really a good place to be. Is this a joint mortgage where you’ll be joint and severally liable if you default? As others have said, the lender can withdraw a mortgage offer literally minutes before you are due to complete if they find something out that makes them nervous to lend.

More than worrying about the loan I think you need to really determine if you have a mortgage offer or not. The offer is quite definite - if you are not sure then call the bank/building society or whoever you have used to get your mortgage.

But don’t banks usually want proof of affordability? It would be a nice world if they just took people’s word for it :) Wage slips aren’t usually enough as you could earn a six figure sum but if you were heavily in debt and living off your overdraft how would you afford repayments?