Mortgage with 5 year old default

E&G · 3 January 2018 at 1:03AM

Hi and thanks in advance for any advice given.

My partner and I are looking to buy a new home. We have about 30k equity in our current home which is solely in her name, as (when we bought it two years ago) we could borrow off her salary alone, allowing me to save into a help to buy isa and improve my credit rating. I have a default which was registered in December 2012 for an old student overdraft account which has since been satisfied by way of a partial settlement. We are now looking to buy somewhere bigger and will need to use both our salaries to borrow this time. Credit files are otherwise spotless, repaid loans for cars, minimal use of credit cards with no missed payments for them or utilities, mobiles etc.

We're looking at homes around 175k, with a 10 or 15% deposit from Help to Buy ISA/savings. Outline affordability calculators on Nationwide and HBOS suggests we could borrow up to 195k.

The questions I have are:

1) my preferred choice of lender would be Nationwide, who we bank with and who would pay £1500 cashback if I took out a Save to Buy mortgage. Would they lend given my adverse credit and would they require a bigger % deposit due to this?
2) if not Nationwide, who'd be the best lender in these circumstances?
3)A 10-15% deposit would allow us to borrow some cash from parents to improve the new place then repay this loan from the proceeds if our house sale. If that's not possible and we need to remortgage for a bigger deposit, how would that impact any subsequent new mortgage application?
4) would a lender allow us to run two mortgages for a short period given we'd be looking to sell or would paying the two be factored into affordability calculations, reducing the amount we could borrow?

Cheers!

ACG · 3 January 2018 at 9:14AM

Your current Mortgage would normally be taken in to account for affordability. There may be an exception if you have a definite completion date.

In terms of lenders you should have high street options with the default. As to whether or not any particular lender will accept it, you need to check with the lender directly. All I can really say is that it should all be feasible in general.

E&G · 3 January 2018 at 11:27AM

Thanks, so unless we sell our house first that will have a significant impact on affordability?

ACG · 3 January 2018 at 12:09PM

It could do. As a broker, I would be picking up the phone to my Account Managers and checking how they would view it. As you are doing it on your own, you need to pick up the phone to the lender(s) you are looking at.

As a general rule of thumb many lenders will ignore commitments if less then 1-12 months are remaining (it varies on lender), but I am not sure if it would be viewed the same with a Mortgage or not as you not only have the Mortgage but council tax, utility bills etc etc.

E&G · 3 January 2018 at 3:44PM

Thanks, I've arranged to speak with a manager in the Nationwide for a pre-application chat so hopefully that sheds a bit more light.

E&G · 5 January 2018 at 1:35PM

I've done a couple of soft checks this morning - one with HBOS which came back saying they'd lend 122k and would require a 15% deposit and another with Co-op (who asked for purchase price and deposit - said 175k and £17,500 deposit) who said they wouldn't lend. So not entirely that promising and, presumably, indicates that I'll need to try and find as big a deposit as I can to find a mortgage at a decent rate?

And I've been doing my calculations based on the best rates offered by lenders at the various LTV price points, but can or will they vary it and set a higher interest rate due to previous adverse credit?

Thanks again for any help.

Thrugelmir · 5 January 2018 at 2:09PM

E&G wrote: »

but can or will they vary it and set a higher interest rate due to previous adverse credit?

Lenders set their product rates against predefined criteria. Either they'll accept your application or decline it. There's no micro management involved.

E&G · 5 January 2018 at 2:27PM

Thanks - that's helpful.

E&G · 5 January 2018 at 4:02PM

Last question: in our circumstances (one first time buyer, one second time buyer, applying jointly) would we be considered as first time buyers or home movers by lenders? (And does the terminology matter at all, or is it just how they market their products)?

YHM · 6 January 2018 at 10:47AM

Depends on lender. Some would consider you FTB, some wouldn't.

E&G · 8 January 2018 at 2:16PM

Thanks. Went to Nationwide today and was told that we wouldn't be considered first time buyers, and that it wasn't worth applying for a DIP given there was a default on the account - they would only consider an entirely clean application.

I have done soft search AIPs with Barclays ('please contact to discuss further), the TSB (who said yes) and the Co-Op (no) although I appreciate these may not be that reliable. Is there any particular high street lender who'd be recommended for a mortgage application with an old default? We would have a deposit of at least 20% and potentially as much as 40%, as we would be selling our current home on affordability grounds now. (I'd rather try with the High Street before then paying for a broker - apologies brokers!).

Mortgage with 5 year old default

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