5 Things you Should Not Lie About on your Mortgage Application

You may think it’s completely harmless to say that the money your parents lent to you for your house deposit was actually a gift and doesn’t need to be repaid. But think again.

When you apply for a mortgage the lender needs to assess whether you will be able to afford the loan and, to do so, they need information on all of your financial obligations – a loan from a family member or friend is included in this. Just because it’s a personal agreement between you and someone you now, it doesn’t mean it should be kept separately.

If you have agreed to pay back the loan for your deposit with monthly instalments, this could affect your ability to make your monthly mortgage repayments too.

If you tell the lender that the money was a gift they may ask for a letter, signed by that person, to say that the money doesn’t need to be paid back.

This lie is unfortunately common – lying about who will be living in the property. You may think it’s okay to claim that the property will be your primary residence, even though you actually intend to purchase it as an investment property and rent it out. This is usually because people want to benefit from the cheaper interest rates and fees charged on a residential mortgage than a buy-to-let.

The problem with this is that lenders deem investment properties to be higher risk than residential, as people will usually work harder to repay the mortgage if their own home is at risk, rather than a rental property.

In a way, lenders may view this as stealing from them as you’re making them lend you more money than they otherwise would have been comfortable with if they knew the truth.

It is also possible for the lender to find out after lending you the money too and this could end up in serious consequences.

A mortgage lender will find out very easily if you’ve lied about your income on your application. During the application process, they will request various proof of income documents, including your last 3 to 6 months’ worth of back statements or tax returns if you’re self-employed. If they find that you’ve exaggerated your income or something doesn’t quite add up, be prepared to have to explain.

If it was a genuine mistake, then you might still be able to go ahead. If they find you’ve outright lied on your application, you definitely won’t be getting a mortgage from them.

Most mortgage lenders will want to see proof of at least two years of steady employment before granting a mortgage, as this will imply a steady and reliable income. So, it can be tempting to say you’ve been working at a company for three years when you’ve actually only been there for one.

In some cases where an applicant wouldn’t qualify for a mortgage on their own, they enlist the help of a family member or close friend to apply with them by claiming they will be a co-borrower. If they really want to help things alone, they may even say that they will also be living in the property and paying towards the mortgage. If this is the case, their income will also be taken into account when the lender assesses affordability.

But lying like this is a very bad idea. When your name is on a loan, it will be listed on your credit report as a debt against you, even if you’re not really the borrower or making payments. Then, later, you may find it difficult to obtain your own mortgage (if you haven’t got one already).