Being scrutinised for a mortgage we can easily afford?

[CasaLuna]

Hi everyone!

Long story short — We suddenly need to buy a flat in my hometown (small northern town) and we’ve found a few we like for £50,000 but because this is very out of the blue, our affairs aren’t in great order. Lots of online shopping and takeaways on bank statements etc. I paid for a few things with Klarna because I like it, not because I didn’t have the money. I’m also paid by my DP’s company (all above board, we have an accountant) but I wasn’t “paid” regularly during lockdown as we weren’t going anywhere or spending anything and had no idea we would be buying a flat.

We earn somewhere in region of £85,000-87,000 per year collectively and currently rent for £1800 per month in London. A rough mortgage calculation says we’ll be paying about £250 on the mortgage which is... well, ridiculous to us.

But I’m worried things don’t look good on paper so just asking from your experience, are all mortgage applications scrutinised in the same way regardless or is a £500,000 application given a closer look than a £50,000 application?

We have years and years of accounts, good credit scores, up to date ID, electoral roll, years of bills (council tax, etc.), the deposit, and our jobs won’t be affected as they’re remote but I’m kicking myself at all the stupid lockdown purchases which make us look bad on paper! 😠

So our combined income is less than yours and our mortgage was for a lot more. DH had a default on his credit score. I had loads of spending on my bank statements. They made no difference at all.

If you have outstanding finance on Klarna/credit cards etc. they will just take the amount you owe away from the amount they think you can afford - so this really shouldn't be a problem unless you have 10's of thousands of pounds debt.

For a £50,000 mortgage I really doubt they'll scrutinise your bank statements for outgoings like takeaways (I think they would only do that if you were borrowing close to what you could afford)

As for your salary, maybe others can advise. There are a more limited number of mortgages being offered at the moment, and for most you need at least 15% deposit (you didn't mention how much deposit you have). Would think that pre-covid payslips and/or last years P60 would be enough to prove income though

I had to google klarna as never heard of it! Why use it if you have the money to pay??? This just seems odd because you 'like it'.

Are you moving to this house to live, or will it be a buy to let mortgage you need? Have you spoken to a mortgage broker? Do you have a decent deposit?

Thank you both, that’s good to know. We have been living in the ridiculous London rental bubble for so long buying has never even been an option for us so this is all new to us.

The Klarna payments are all cleared, I just find it handy if I need to try a few sizes, means I don’t have to pay for 2 or 3 of the same thing upfront. Deposit is flexible depending what they want from us, could go up to 20-25%.

I had problems because we wanted to borrow against our mortgage, but have lots of small loans and credit cards. We had about £10k on credit cards interest free but had £12k in premium bonds ready to pay it but they would only count loans and debts not savings ?!?!

We did eventually get the money but we needed a certified accountant letter

@Elouera Sort of answered your question by accident! I find it’s good if you need to try a few sizes and I’m always in between depending what the material is like.

So if I buy two dresses for £35 each and have to get them both in two sizes each that’s £140 gone from my bank account. With Klarna, the brand sends it, I try it everything on, send back what I don’t want and only then pay £70 or zero if you didn’t like any of them. No waiting for refunds to be processed etc. I think it’s good if used responsibly but heard it looks bad on mortgage applications and they view it as emergency credit.

Does using klarna affect your credit rating, or only if you don't pay it back?

If it’s a Northern town then it won’t be commutable to your London jobs. That might be a problem as it’s clear that either you’ll quit your jobs to live there or you’ll rent it out. Neither of which is going to impress the bank if you’re applying for a residential mortgage.

No idea about the mortgage, but to overcome the problem about online shopping, sending most of it back and using Klarna, just pay by credit card.

Chances are everything will have been refunded before you need to pay the bill and you just set up a direct debit to pay the balance off in full every month and treat it as another bill. That's seen as good use of credit, no idea what they think of Klarna.

It's also much easier and avoids the need to use a debit card linked to a bank account on the internet - if it gets hacked, they potentially have access to the contents of your bank account and it's a lot more inconvenient to have your main bank account frozen/subject to fraud, than a credit card.

Sorry, also forgot to say it’s not buy-to-let. I have an ongoing family situation and we need to move back to my hometown for a while. Can’t say how long for but rentals are about £650 per month and my whole family in based there so it’s always going to be useful to us to have a little flat there.

That might be a problem as it’s clear that either you’ll quit your jobs to live there or you’ll rent it out. Neither of which is going to impress the bank if you’re applying for a residential mortgage

The OP hasn't said why they're buying the flat. My guess is that they need somewhere to stay over while visiting elderly parents, or they're helping out an adult DC so not a commercial rental.

Hopefully the bank won't assume what the OP plans to do with the flat that they're purchasing and make decisions to the negative on this basis.

Cross posted, and anyway, if they're currently WFH and expect to for a while they can live anywhere and central London is less than 3 hours door to door from many places in West Yorkshire area. Fine for the occasional day in the city - I know people who commuted 4 days a week from places as far afield as Doncaster.

@BarbaraofSeville Great suggestion about the credit card, it’s definitely something I’ll look into. Wanting to use Klarna so I don’t have to wait for a refund is such a first world problem but I can’t deny it is useful, especially those times you hate everything and send it all back. But yeah, I read it is viewed badly, almost like a payday loan.

Our jobs are remote, always have been even pre-Covid but do require an occasional London office visit which we’re happy to do.

I had to google klarna as never heard of it! Why use it if you have the money to pay??? This just seems odd because you 'like it'.

Similar income to OP & bloody love Klarna. I like the fact I only pay for what I keep & don't have the admin to check for refunds.

Used to use a credit card for this but had a couple of instances where I returns were lost or not refunded & a ball ache to chase the money back up.

Also also, nothing nefarious about it. I was born and raised there, my family lives there, I need to go back for probably 6-8 months (too long to stay with family) and we’d keep it afterwards as our place to stay when we visit. We go at least 4 times a year so it will actually be nice to have a home away from home instead of guest rooms and lumpy mattresses!

Hope I answered most of the questions! Seems to be that my situation isn’t the best but might be okay for what we’re buying. It’s just a shame there’s loads of silly money spent over the past few months and also the Klarna thing. But hey ho, we didn’t know this was going to happen so we’ll just try our best.

@roary15

Used to use a credit card for this but had a couple of instances where I returns were lost or not refunded & a ball ache to chase the money back up.

But if the return was lost, that would need chasing up whether paid by credit card, or Klarna, surely? The item would have to be returned and processed properly when using Klarna or else you would pay for it I would expect.

Well if I had proof of postage to confirm I sent it back Im not out of pocket, waiting for refunds.

When I remortgaged 2 years ago for an extra £30k for home improvements, Nat West scrutinised everything. I remember a 20 minute chat about 1 Argos payment for less than £100. They have to be sure that you aren't stretching yourself.

I'm quite a prolific online shopper to be fair & Ive had issues where a refund has apparently been given but not actually paid into bank account/credit card & had to chase that up.

I've had it once with Klarna where a item was lost whilst returned. I sent the proof of postage to Klarna & they sorted it out with the retailer.

Your situation may actually be beneficial! It shows you know how to manage debt and pay it back in a timely manner. Banks often worry more about people who don't have that experience.

Good luck!

I'm more shocked that you can pick up a flat for £50k

@OneRingToRuleThemAll This is exactly my concern. One week I placed an ASOS order, the NEXT DAY something came back in stock literally one left in my size so I bought it. Then 3 days later I sent my sister a birthday present but obviously it doesn’t say ‘yeah but this came back in stock and this was a gift’ on my statement so it just looks like three orders in one week. Bad. :/

@Smallgoon

I'm more shocked that you can pick up a flat for £50k

I'm not. Seems a perfectly normal price to me. Take your pick.

And that's just one search in one town of the type that the OP is referring to, there's probably dozens of other similar options.

Your normal is not normal .