Taking out finance, such as a personal loan, in the months prior to a mortgage application can raise questions from potential lenders – in some instances it can even lead to a rejected application if not addressed correctly.
The client was a 28-year-old South African national who had lived and worked full-time in Dubai for one year. This was his first ever property purchase and he had already found an apartment in Dubai Marina that he wanted to buy before he approached us. He had raised the 20% down payment required. However, he needed to include some of the associated costs, namely the DLD fee and real estate fee, within the mortgage in order to use the cash saved to renovate the property once he moved in.
There were a couple of challenges that we had to overcome with this case. First, the client was buying a property where the seller was still in an existing payment plan with the developer which meant that the seller did not have a title deed for the property. The title deed was still in the name of the developer and would remain so while the payment plan was still in place and some banks will not lend in this instance.
Second, the client had taken out various forms of finance in months leading up to the mortgage application including a car loan, a personal loan and some credit cards. The client was still eligible for a mortgage. However, because the personal loan had been taken out within three months of the mortgage application, we had to provide evidence of what the personal loan was for. This is because some banks require proof that any loans taken prior to a mortgage are not being used towards the property purchase.
Being aware early in the process of the issue around the title deed and outstanding payment plan on the part of the seller, meant that we took this into account when we were conducting our search of suitable lenders. We also made sure to raise this to any lenders that we were considering for this client, to make sure that it would not cause delays and challenges later down the line.
With regards to the challenge around the client’s recent personal loan application, we asked the client to produce all receipts and documents which showed what the finance had been used for. In this case the client had taken the loan to fund an educational course. Producing the documents to prove this to the bank meant that we avoided unnecessary questions and delays for the client.
We managed to find a bank that would accept the client regardless of the issues surrounding the title deed. Furthermore, our preparations in terms of gathering the correct evidence for the client’s personal loan paid-off as the bank did not raise any concerns over this.
How can we help you?
Our team thinks ahead, so you don’t have to. We build a full understanding of your circumstances and make a note of anything which could cause potential challenges in your mortgage application to make sure these are addressed from the outset.
Case study by Jeff De Souza, Senior Mortgage Consultant