Peculiar reason for declining a mortgage

[sekhmet]

I wonder if anyone can help? My current mortgage provider has given us good terms to transfer our current fixed rate to our purchase of a new property. The mortgage was agreed in principle (for the additional lending) so we then proceeded. The application form asked how many kitchens the property has - I said two - 1 proper kitchen/diner and the other is a kitchenette in the main sitting room. The company has now declined the mortgage on that basis stating that the property could be used for commercial purposes. They have stated that the only terms the mortgage could be taken forward is if the current owner rips out the kitchenette completely in advance of the valuation. Clearly the vendor won't as the sale is not yet agreed! I have given assurances that it will not be used for commercial purposes and also offered that we immediately remove the kitchenette on completion (which I am prepared for them to inspect). They have refused saying it is company policy not to allow a mortgage where there is more than one kitchen!

I despair! To add insult to injury, they have told me that it is also their policy to take the fee of £250 for processing the application! There was no advice or any indication on the form to support the 'standard policy' not to lend if the property has more than one kitchen!

Can anyone offer any advice or suggest if this is common practice? The other issue is that a credit check has now been run on our details and as we know, the more searches that take place then the lower the credit rating. We don't want to get caught out on some obscure technicality again!

[brian]

Was the £250 fee clearly stated before the application was made?

[mortgage_advisor]

Firstly, a few credit searches here and there won't do you any harm. It's lots of credit searches in a short period that do damage, as it makes you look desperate for credit.

As for the two kitchens problem, this is not uncommon, in fact most if not all residential lenders will have issues with 2 kitchens.

I recently got a case though for a property with 2 kitchens as I argued there was no way the property could be let out as 2 residencies (which is what the concern is) as if you looked at the property it simply wasn't plausable, and I managed to get an underwriter to agree.

Alternatively, an option can be to agree to rip out the extra kitchen between exchange of contracts & completion, some lenders may agree to that. I have known this happen in a situation where there was no kitchen, and the loan was essentially agreed with a 100% retention until the kitchen was installed. The client agreed to do this before completiing and the vendor agreed to let the client do the work before any funds were transferred, so this worked as well.

Essentially, there are options, but you either need to do some serious researach first, or alternatively speak to an independent mortgage broker. Without wanting to say "I told you so" or something similar, if you had gone to a broker this probably would not have happened, and if you did, you should have words with your broker.