Top Up Mortgage Declined by Underwriter - makes no sense

eolasguy · 10-10-2022 1:46pm #1

Hi,

Just wondering if anyone has come across this situation and if they would have advice on the next steps.

Switching my mortgage moment. I have a loan that I wish to consolidate (costs ~700pm) into the mortgage. Explained to the bank we fully understand and accept that the repayment of that loan is increased by adding it to our mortgage but we want to consolidate our loans into a single lower per-month repayment due to the potential economic downturn we face. Playing it safe and all that. For context, we are a single-income family with 2 kids.

So we started the whole top-up process....

Bank came back today to say the underwriter is declining our top-up mortgage due to us not being financially stressed to repay our current loan. 😡

I don't understand the motivation to do this, 1) they are making more money off me in the long run and 2) it gives me a better chance to repay the monthly repayment in a worst-case scenario. I think this reasoning by them is completely unfair and makes no sense.

Any idea if we can appeal such a decision?

Henry Ford III · 10-10-2022 2:10pm

Not being smart but surely the answer is to ask your bank.

walterking · 10-10-2022 2:17pm

"Top up" is purely a marketing term. In reality it is an additional mortgage but behind the scenes the bank will create the look of a single loan with a single repayment.

If you were with kbc your account number would be along the lines of 300123/1 and then the top-up would be 300123/2. Other banks have similar.

A top up to consolidate other loans is rare. It is usually only for improvements to the main property held and it is stress test itself as an independent loan. The bank also has to abide by regulation.

I think you were poorly advised in the first place by the broker who should have known that such reason for a top-up is not acceptable

Smee_Again · 10-10-2022 2:21pm

It does make sense.

The mortgage underwriter doesn't care if you default on personal loans, credit cards etc as long you continue to pay the mortgage. By consolidating these loans into the mortgage they would be taking on this extra risk.

And, if you can currently service the loans then there's no real reason to consolidate into a loan where you will end up paying more interest in the long run.

SteM · 10-10-2022 2:31pm

You're a single income family so there's a already a risk to the mortgage provider. You have said that there's a potential economic downturn, if your family loose that single income for whatever reason the bank will be exposed to further risk by lending you more, their motivation is that they keep the risk to a minimum. It makes perfect sense from the bank's point of view.

eolasguy · 10-10-2022 3:01pm

https://www.boards.ie/discussion/comment/119726111#Comment_119726111

That's a good point. Just to clarify - We are moving to a decent lower interest rate. So our monthly mortgage repayments only go up 28e and we remove the need to pay for the short term loan.

SteM · 10-10-2022 3:10pm

https://www.boards.ie/discussion/comment/119726277#Comment_119726277

Fair enough but from the bank's point of view it doesn't really matter what the rate is if things go belly up and you can't pay the mortgage. You'll be a bigger liability to them if you owe them more. It's a purely financial decision based on levels of risk for them.

Anyway, best of luck.

daheff · 10-10-2022 3:34pm

why not move the existing loan to the lower rate and use the saved money to accelerate payment for the other loans? Or put this aside into a savings account? Best of both worlds then

Jim2007 · 10-10-2022 4:12pm

https://www.boards.ie/discussion/comment/119726277#Comment_119726277

You are missing the point, the downturn in the economy impacts everyone including the underwriter. He like you is seeking to reduce and consolidate his risk. He already has your house against the mortgage and the value of that is likely to decline as the downturn gets deeper. It makes no sense for him to give you more money on a declining or at best static valuation, he would be increasing the amount he stands to loose and he is not going to do that.

3DataModem · 10-10-2022 9:41pm

https://www.boards.ie/discussion/2058266852/top-up-mortgage-declined-by-underwriter-makes-no-sense

Using a mortgage to consolidate loans is seen as an indicator of high-risk borrowing behaviour by a bank.

Once you have it lumped onto the mortgage, about 85% of people go right out and get another term loan / credit card on top of it within the year.

Top Up Mortgage Declined by Underwriter - makes no sense

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