If you have a high level of debt and commitments in relation to your annual income it won’t surprise you that the majority of mortgage lenders will turn your mortgage application down, due to the perceived risk of exposure.
As a rough guide, a high level of debt for the purposes of this explanation would be considered as anything approaching 75% of your annual income.
If there is a good reason for the high level of debt – such as home improvements or maybe you have recently lent a family member some money then we have sympathetic underwriters who will base their lending decision on the overall quality of your mortgage application and the quality of reasons behind your debt levels.
If your level of debt is simply down to living beyond your means and the purpose of the new mortgage extends this further OR the new mortgage is for debt consolidation purposes you will most probably find your application being declined.
We have recently had a mortgage application approved for a client (ref TmblLiddleaug12) where the high level of outstanding credit card debt and loans approached 100% of the client’s joint income. The applicants original broker could not get the clients approved anywhere and had submitted applications which were subsequently declined meaning the client lost precious time and money in the process. When the client approached us we dug a little deeper to find out the reason behind the debt – the reason being that the applicant’s son needed expensive surgery for a medical condition that he suffered from and they had recently lent a friend some money to assist with their house renovation.
Our application to the lender was initially referred to a senior underwriter and after a few days, with the sufficient proof being provided to the underwriter for the levels of the debt, the case was approved and has the mortgage offer letter has now been issued.
So in summary, a mortgage with high levels of debt is possible if a mortgage lender can be seen to demonstrate responsible lending.