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Banks are strange

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Old Oct 11th, 2018, 16:12   #1
T5R92011
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So I went to my bank the other week with the purpose of remortgaging, and to borrow an additional £10,000 on top of my 38 year mortgage.

My property is worth just under £150,000 and my mortgage owed was £112,500.

Went through the application with their Mortgage advisor, asked me all the questions on affordability etc etc... Outcome? Additional borrowing Declined on the basis of affordability.

Fast forward 2 weeks later, I decide to try applying for a £15,000 personal loan over 7 years with the same bank via their online banking system. The system asked me NO QUESTIONS about what my general expenditure and instantly approved and payed out the loan within what must have no more than 2 minutes from filling my name in, to clicking "Apply".

I cannot understand the logic here?
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Old Oct 11th, 2018, 17:54   #2
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I would say that any mortgage application is almost certain to be analysed at some point by a person whereas a loan application will most likely be computerised and will only give a no or referral if your general credit rating and payment history score doesn't pass an arbitrary pass mark.

I agree that it can appear not to make sense but many financial instruments are counterintuitive.
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Old Oct 11th, 2018, 18:54   #3
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Perhaps it is faster and less hassle for a bank to get their money back from a defaulted loan agreement than for a defaulted mortgage?
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Old Oct 11th, 2018, 19:18   #4
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38 year mortgage?

That right there is your problem. Assuming that you're not below the age of 30 then they are already looking at you trying to pay off your mortgage without an income in 38 years time. They're certainly unlikely to extend borrowing on that!

The loan is over 7 years, so assuming you're not over the age of 55 then they're not going have such concerns.
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Old Oct 11th, 2018, 19:24   #5
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You breached the magical 70-75% threshold for refer to another underwriter or re-insurer! Anything secured on your property above 75% always causes more issues, especially if your home isnt that old or a new build flat then they dont even trust your valuation!
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Old Oct 11th, 2018, 20:29   #6
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38 year mortgage?

That right there is your problem. Assuming that you're not below the age of 30 then they are already looking at you trying to pay off your mortgage without an income in 38 years time. They're certainly unlikely to extend borrowing on that!

The loan is over 7 years, so assuming you're not over the age of 55 then they're not going have such concerns.
This is interesting, I was 27 when I took out the mortgage. I just assumed they'd prefer to make that back in long term interest gained over 38 years, than the 7 years via the personal loan.

I suppose the real question is why the heck would anyone want to add 10k onto a 38 year mortgage...
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Old Oct 12th, 2018, 17:28   #7
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I suppose the real question is why the heck would anyone want to add 10k onto a 38 year mortgage...
Some years ago my bank started doing 'one account' where they lumped all of your money together so any savings or positive balances were offset against the mortgage to lower the interest costs, the only issue was that my mortgage wasn't big enough to qualify. In order to get the 'one account' I had to borrow another £7500 which had to be for a sensible purpose, at about the same time the wife needed a new car. I told the bank that I wanted to replace the kitchen so they happily advanced the extra money and then lumped the accounts together and the money in my savings effectively offset the extra loan. But we did have a bit of fun when buying the car as the dealers insisted we talk to their finance department, so we sat there and listened to their spiel and then I said to the wife 'We can just add it to the mortgage' knowing it was already covered by the offsetting, the finance guy nearly had a heart attack and then lectured me on having a 25 year loan for a car that wouldn't last that long while we just sat there and said we weren't bothered.
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Old Oct 12th, 2018, 17:28   #8
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I suppose the real question is why the heck would anyone want to add 10k onto a 38 year mortgage...
Yes I was thinking a personal loan would seem a better a bet. I think there are specific laws around affordability on mortgages which aren’t there for personal loans. If you look to remortgage your loan will be taken into account though.
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