Trip Wires – Lenders requirement of bank statement, what’s acceptable and what’s not!

By: Justin Phillips, Principal and Mortgage Adviser at Open Vision Finance. I am an experienced Mortgage Adviser at Open Vision Finance, specialising in Mortgage Advice Taunton, Bristol and the South West region

Increasingly over the past 10 years, banks and building societies have been asking for more and more information from you as a customer, and even if a lender isn’t asking for this information, your broker will be! Typically over the past 20 years, we have had a single A4 ‘Fact find’ replaced by a new client fact find of 15-25 pages.. so why do we as a broker need more information than ever?

In essence, a broker, or for that matter a lender, needs to prove and show due diligence that they have lent monies responsibly, and to do this we need to get to know you as a client! It’s not only a responsible step to take but also helps place the right, most suitable and most competitive lender/insurance provider for you as a client.  These days this will include how many children you may have, their ages, smoker status and how much you may spend on this, day to day and regular outgoings and in some instances one off, non-regular outgoings or expenditure – all of this will help the lender decide what disposable income will be left at the end of each month and ergo what they will lend you!

So what do we need to look out for which isn’t always acceptable from a lender?

The lender will focus on two main areas, which can reduce the amount they will lend…

Payslips – we will look at using ‘Gross Income’ i.e. the higher figure before tax and National Insurance is deducted… however some lenders will deduct pension contributions, any child care costs, clubs or saving/share schemes if they are taken directly from your payslip.  We can advise accordingly which lender best suits your requirements/deductions/expenditure.

Bank statements – this is the most commonly overlooked area by our customers… Nowadays before submitting a mortgage application, as a broker, we will audit a client’s bank statements (last 3 months) and whilst 99 percent of what we can see is perfectly acceptable, focusing on two points occurring on a weekly basis…what is not acceptable?…

Unauthorised usage of an overdraft  – by all means use the facility.. this is even at times deemed to be demonstrating ‘borrowing responsibly‘ and this is a good thing, but if you do use this, you need to ensure that the overdraft amount being used doesn’t exceed the agreed overdraft limit… this commonly happens and these days can be a potential trip hazard when applying for a mortgage. Keep your head above water at least once a month… so when you get paid, in an ideal world, you will remove yourself from your overdraft limit at least once a month.

Betting – it is not against the law, there is nothing wrong with betting but BE AWARE… this is now one of the most common issues we have with clients frequently spending hundreds if not more each and every month and whilst some of these bets will be re-paid by winnings, a lender will not deem this as responsible… so if you are going to bet, be aware whatever you spend each month could be classed as an outgoing or even worse make the lender uncomfortable to lend at all. Lenders need to be assured that it is not a gambling addiction. “When the fun stops, stop”.

A mortgage application is rarely about if you should or shouldn’t bet or get a loan, use an overdraft or buy a car on finance, as these are every day occurrences and decisions made by all of us; its about knowledge and having an understanding to what the lender is going to deem acceptable or not…

Contact Details – Mortgage Advice Taunton, Bristol and the South West Region

If you have found this article interesting or would like to arrange an appointment with one of our experienced mortgage consultants (Mortgage Advice Taunton, Bristol and the South West Region), please get in touch with us on 01823 444022 or by email to advice@openvisionfinance.com.