Expat Mortgage Disaster
Have You Checked Your Credit File Recently?
Expat Mortgage Disaster
F*%k!
It’s early March, 2023.
We’re applying for a mortgage for a block of four flats in Derbyshire.
The block was bought with two weeks to spare during Season Two’s self-imposed four-month challenge to purchase a property at auction without setting foot in the UK (Episodes 35 – 53)
I’ve just received an email from my Expat Mortgage broker.
‘I've spoken to the lender and unfortunately there are no exceptions. They allow two missed payments in a period of 24 months however this makes it two in 12 months. I'm afraid you will have to get it removed from your credit report and I’ve put the case on hold until you advise me what to do.
I had thought I’d got away with it.
The mistake.
But before we go any further, you’ll need more background.
Because the block was bought at auction. Pre-auction to be precise, but under auction conditions. We had to pay cash because, as is the norm under the hammer, completion would take place 20 business days after we’d exchanged contracts at the start of August, 2022.
The flats were in a right old state and needed complete refurbishment, which went ahead either side of Christmas.
As soon as the flats were finished, we’d started the application, the lender had sent a RICS valuer to the property and we’d received the report a week later.
Our broker had asked us if he could confirm to the lender that I was accepting the offer. I had said yes, but a couple of hours later, he had emailed me back with a message he had received from the lender:
“It is noted from the applicants' credit files that show arrears of 1 month. Payments must be made up to date in order for the application to remain within criteria. A credit check will be re-run before offer to ensure that the payments are up to date.
I had no idea what this was about and nor did my broker. He advised me to run a check with Experion.
I tried, but Experion wouldn’t let me check my file from a Hong Kong browser, so I was none the wiser.
My broker investigated on my behalf.
It was a missing payment from my Halifax credit card. If it was a mistake, I needed to get it removed from my file as it would affect future lending.
In the meantime, I needed to provide proof that I had cleared the balance via my credit card statement and have an explanation ready for the lender should they require one.
I logged onto the Halifax website.
Buried deep among all the messages was a notification back in July the previous year, 2022 saying that they were cancelling my direct debit, which in my case had been set up to pay off the balance at the end of every month.
Halifax did not specify the exact reason for the cancellation, instead offering a variety of possible reasons, the first and last of which were bank errors, which rightly or wrongly got it into my head that it was not my fault so I filed it at the back of my mind as not something that required my immediate attention, especially as I only ever really used that particular credit card when visiting the UK, which was something I had been unable to do since the onset of Covid nearly three years previously.
However, the actual reason the direct debit had been cancelled was sandwiched slap bang in the middle of seven potential explanations. It was because my credit card had been inactive for thirteen months.
August, September and October came and went and then at the start of November my mum, who had been ill for some time, took a turn for the worse. It looked like she was entering the final days of her life.
I got a phone call from a family member at around 4 pm one Monday, early in November and quickly made the decision to fly home. By 6pm I’d booked a flight and by 7pm I was on my way to the airport after my wife had kindly packed a suitcase for me.
By UK morning time, I had landed at Heathrow. When I went to unpack the suitcase, which belonged to my wife and had a number lock on it I realised I didn’t know the number.
I WhatsApped my wife and she told me the few numbers that it could possibly have been. None of them opened the case.
Refusing to admit defeat, I went through each and every number and trying the lock, starting at 000 until I reached 864 which magically did the trick. My joy turned to despair as I opened the suitcase.
It wasn’t mine!
In my haste and confusion at the airport, I'd taken the wrong case!
I managed to get in touch with the man whose suitcase it actually was and arranged for a courier to pick up the case and deliver it to the real owner, who was very understanding about everything.
After speaking to the airline, it was left to me to arrange for my suitcase to be delivered to me from Heathrow where it had obviously remained since my arrival, and for the victim’s case to be forwarded to him in Central London.
For one reason or another, the courier company would not accept my Hong Kong credit card so I had to use my UK Halifax credit card. The one that I had not used for more than 13 months, and the one for which they had cancelled the direct debit.
My mum got a little stronger over the four days I was there and on the Saturday I returned to Hong Kong.
Just over a week later, life got even busier.
You may remember the two consecutive days in November when we took advantage of an unmissable opportunity to buy a house in Nottingham, at extremely short notice on the Monday a house in Lancashire at even shorter notice on the Tuesday. Episodes 77, 78 & 79 contain the full story.
Sadly, on the Wednesday, my mum passed away.
Meanwhile, my £60 outstanding balance on my Halifax credit card went unpaid. I had completely forgotten that the direct debit had been cancelled. I would also need to return to the UK in December for the funeral and when I went to hire a car, the carhire company would not accept my Hong Kong credit card so I used the Halifax one again and once again, it had completely slipped my mind that Halifax had cancelled the direct debit set up to clear my credit card balance at the end of each month.
What with the jet lag from my return to Hong Kong and going back to work and everything going on around completing those two deals and arranging the private finance with the loan agreements, legal charges and personal guarantees etc. not to mention the turmoil caused by my mum’s passing, my credit card confusion had retreated further into the depths of my consciousness.
Back to March of this year and after my broker had alerted me to the missing credit card payments, I immediately phoned up the Halifax, paid off the balance and reinstated the direct debit.
I also tried to get the missing months removed from my file.
One of the managers from the Credit Card Operations team told me he would try to help me by writing the report in such a way as to try and get the missing months removed from my file. He could not guarantee that the missing months would be removed, especially since it was not a bank error that led to the situation, and that I would find out the results in six to eight weeks.
I went back to my broker and explained how the bank had cancelled my direct debit due to 13 months’ inactivity and how I had subsequently used the card which resulted in the missing months.
He empathised with me, suggesting that he didn’t know how the bank could justify their actions. But that was before he heard back from the lender again. It was not good news.
Despite the fact that I had now cleared the balance and reinstated the direct debit, the second missed month had now trickled through the banking system and landed in my credit file.
This is what he said:
I've spoken to Keystone and unfortunately there are no exceptions. They allow two missed payments in a period of 24 months however this makes it two in 12 months. I'm afraid you will have to get it removed from your credit report and I’ve put the case on hold until you advise me what to do.
The upshot of all this is that if I can’t get the unpaid months removed from the system I will have to wait until March 2024 for my file to show two missing months in 24 months rather than 12.
My initial reaction was that it was a disaster and then I was embarrassed . This all coincided with our three part trilogy about the two deals that gave us a £126K profit in two deals that we used as the backdrop to the launch of our new website which in itself was designed to demonstrate a new professionalism in our property business. And here we were credit blacklisted.
There are three main reasons for writing this tell all blog.
Firstly, friend of the podcast, Property Tribes’ Vanessa Warwick’s mantra is that ‘None of us is as smart as all of us’.
If this story can help others avoid the mistake that I made, then at least someone gets to benefit.
This article is a brief version of the full story which can be found in Episode 84 of Expat Property Story, which also goes into more depth around the lessons to be learned from this sorry situation as well as the perhaps unexpected opportunities presented by what initially felt like an expat mortgage disaster.
The opportunities are:
1. To look for ways to add more structure to our business.
2. To consider using this period as a means to grow the pot through flips while we look for a solution to our credit situation.
3. To `accelerate our plans to raise finance from private investors so that we can to more deals for the mutual benefit of our investors and ourselves.
Watch This Space!