How likely do you think I would be able to get a loan?
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FirstTimeBuyerRenovation
Posts: 10 Forumite
Okay, I know nobody will be able to give me an actual answer here. Just trying to figure out how likely, or unlikely I'll be able to get a loan to finance renovation on my first house.
I got a new job in October last year, I'm only contracted to 25 hours a week, however I've never actually worked that few... I think the lowest would be about 37 hours and for the past few months it's been more like 47 hours a week. My hourly rate is decent for Yorkshire, £11.30, due to have a pay rise to £12.72 in October. I've been earning between 1,600-1,900 a month after tax.
I have one late payment on my credit history, from Very. Currently disputing this with the ombudsman, fairly confident it'll go in my favour and be removed. My credit file also shows a credit account open with Very, £0 balance and £3,000 limit. I intend to close this account down once the dispute is sorted.
I currently have a credit card, £3,500 limit, got a £2,900 balance on it. Wish I'd managed to actually clear this balance to be honest, ended up on sick for six weeks early on in the year which affected three of my wages... Pay about £95 a month to clear this off.
Mortgage... Right, currently I'm with my parents, a house came up on the street, probably one of the quietest and better areas in the village I live in. It was listed at 95K, now I have no savings and my parents said they will give me a 5% deposit if I went for it. (Moving out has been on my mind, but only for the past few months, not had time to save anything). Went to have a look inside, and to be honest, the place is a dive. Every room needs renovation. Doors are hanging off in the kitchen, not had a new bathrooms since the 90s, floral carpets from the 90s. Warn in bedroom carpets, Artex that probably bumps out by about an inch on the stairs.... You get the idea. Anyway, due to the work required, and the money that'd need to be spent on it, I figured I'd put a low offer in, went in with 70K. Didn't think they'd get much interest with the house how it was, didn't think she'd accept the offer... at least just yet, thought she might sit on it for a few months and wait to see if there's any interest.
The house had been on the market for two days, I was the only person that viewed it and she immediately accepted my offer... I was shocked to be honest. A house up the street in similar condition has just been sold for 90K. So, despite my no savings, I've decided to go ahead and purchase. I've seen a mortgage adviser. 5% deposit is just 3500, mortgage will be for 66500.
Now, even with such low figures the first few providers declined me because (as the adviser put it), my credit score. However, Natwest have accepted, and whilst not the cheapest, we're talking of a £12 a month difference. So that's fine, still in the early stages, but I have an agreement in principle for the mortgage, so it looks like the house will be mine in 8ish weeks?
However, as a few mortgage providers had declined me on such a low mortgage, I'm now wondering whether or not my initial plan to get a loan (for renovation) would be accepted. For the mortgage, council tax, home and contents, life insurace, gas, electric, water, TV license, broadband and mobile phone, I'll be spending approximately £697 a month. As things stand, I also have about £90 a month to pay for the credit card, and £56 a month on some finance I got for some computer parts (this however does not show on my credit file). So with no loan, as things stand my expenditure will be around £873 a month, leaving me with between 757-1057 a month (based on recent wages), for food, toiletries and everything else. A 10-15K loan over 7-10 years will certainly be affordable. I think from the little research I've done, 15K over 7 years would be around £196 a month. If I were to pay off my credit card with that and use the rest of it to renovate my expenditure would be around 950 a month, leaving me with 655-955.
Anyway, sorry for such a long explanation for such a simple question. But the purchase looks like it will be going ahead, and I obviously can't apply for a loan until I have the keys for the house, just in case the mortgage falls through.
Just trying to figure out whether a loan would be likely or not, given the declined mortgages, so I can start to plan over the next couple of months before I get it.
I got a new job in October last year, I'm only contracted to 25 hours a week, however I've never actually worked that few... I think the lowest would be about 37 hours and for the past few months it's been more like 47 hours a week. My hourly rate is decent for Yorkshire, £11.30, due to have a pay rise to £12.72 in October. I've been earning between 1,600-1,900 a month after tax.
I have one late payment on my credit history, from Very. Currently disputing this with the ombudsman, fairly confident it'll go in my favour and be removed. My credit file also shows a credit account open with Very, £0 balance and £3,000 limit. I intend to close this account down once the dispute is sorted.
I currently have a credit card, £3,500 limit, got a £2,900 balance on it. Wish I'd managed to actually clear this balance to be honest, ended up on sick for six weeks early on in the year which affected three of my wages... Pay about £95 a month to clear this off.
Mortgage... Right, currently I'm with my parents, a house came up on the street, probably one of the quietest and better areas in the village I live in. It was listed at 95K, now I have no savings and my parents said they will give me a 5% deposit if I went for it. (Moving out has been on my mind, but only for the past few months, not had time to save anything). Went to have a look inside, and to be honest, the place is a dive. Every room needs renovation. Doors are hanging off in the kitchen, not had a new bathrooms since the 90s, floral carpets from the 90s. Warn in bedroom carpets, Artex that probably bumps out by about an inch on the stairs.... You get the idea. Anyway, due to the work required, and the money that'd need to be spent on it, I figured I'd put a low offer in, went in with 70K. Didn't think they'd get much interest with the house how it was, didn't think she'd accept the offer... at least just yet, thought she might sit on it for a few months and wait to see if there's any interest.
The house had been on the market for two days, I was the only person that viewed it and she immediately accepted my offer... I was shocked to be honest. A house up the street in similar condition has just been sold for 90K. So, despite my no savings, I've decided to go ahead and purchase. I've seen a mortgage adviser. 5% deposit is just 3500, mortgage will be for 66500.
Now, even with such low figures the first few providers declined me because (as the adviser put it), my credit score. However, Natwest have accepted, and whilst not the cheapest, we're talking of a £12 a month difference. So that's fine, still in the early stages, but I have an agreement in principle for the mortgage, so it looks like the house will be mine in 8ish weeks?
However, as a few mortgage providers had declined me on such a low mortgage, I'm now wondering whether or not my initial plan to get a loan (for renovation) would be accepted. For the mortgage, council tax, home and contents, life insurace, gas, electric, water, TV license, broadband and mobile phone, I'll be spending approximately £697 a month. As things stand, I also have about £90 a month to pay for the credit card, and £56 a month on some finance I got for some computer parts (this however does not show on my credit file). So with no loan, as things stand my expenditure will be around £873 a month, leaving me with between 757-1057 a month (based on recent wages), for food, toiletries and everything else. A 10-15K loan over 7-10 years will certainly be affordable. I think from the little research I've done, 15K over 7 years would be around £196 a month. If I were to pay off my credit card with that and use the rest of it to renovate my expenditure would be around 950 a month, leaving me with 655-955.
Anyway, sorry for such a long explanation for such a simple question. But the purchase looks like it will be going ahead, and I obviously can't apply for a loan until I have the keys for the house, just in case the mortgage falls through.
Just trying to figure out whether a loan would be likely or not, given the declined mortgages, so I can start to plan over the next couple of months before I get it.
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Comments
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I don't mean to be patronising, but if you currently live at home, earn £1900 a month and can't afford to save anything at all, how will you be able to afford a mortgage AND a loan?0
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It's fine.
My circumstances are hugely different to what they were a year ago. My last job I was earning 1180 after tax, and I never understood where my money was going. I'd break even each month and never really had anything to show for it.
Smoking is one huge factor, 20 a day, throw an extra pack a week in for when I'm having a drink. And you're easily looking at £320 a month on cigs. (Since the mortgage has come around I haven't had a smoke for a week, so that's going well). And I never actually realised it until changing jobs, but I was working from 9:30-8 at my old job, four days a week. I was basically eating three meals a day there, and the place was expensive, I used to draw out £20 a day, for cigs, £3 bus fair and the rest on food and drink.
Since I moved jobs in October, the first wage was low due to how you're paid there. November and December were good. But, for six weeks I was on sick and it affected my January, February and March's pay. I've had three months proper wages since being affected by sick, it's not that I couldn't afford to save, I just didn't need to, so chose to spend my money. I would have managed to save £1,000 this month whilst still living comfortably, had it not been for the mortgage adviser fees, still leaves me with £400 though. Should be able to save a bit more in the coming months. Hoping the solicitor takes his time so I can scrape together at least £3,000.0 -
As you said no one can tell you for sure, but my guess would be, I don't see any definite reason why you wouldn't get a loan, BUT I think, based on your potential commitments and credit history, you are being optimistic in hoping for a 15k loan which will only cost £196 a month..... that's only 2.4%. I think your optimism applies to both the amount you want and the APR.
You don't need to do the whole house at once.
It's possible to get a decent bathroom and kitchen done for 5k total. Just buy the units online and get a builder to fit them. The price will be a fraction of what all in one companies charge to design your kitchen and fit it.
Unless the house is massive you should be able to buy and fit new a semi decent carpet for £1200 ish. SCS / Harveys usually do deals on carpets where they give you free underlay, and get quotes from local fitters to find the best price.
You can live with the artex and other stuff. Throw up a coat of magnolia paint yourself, that will make a world of difference.
Why not aim for a loan of 5k and do the rest as and when you can afford it.
As you will have circa £1000 spare each month it shouldn't take too long.0 -
Thankyou for the advice!
Whilst not particularly handy myself, I'll be able to cut costs down by removing the kitchen, wallpaper and carpets myself.
I'm fairly fortunate having a lot of friends and knowing a fair few people in trades. So fitting kitchens, bathrooms etc shouldn't cost too much.
It's a smallish semi detached house. Two bedrooms, well, three actually, but the third room is basically a renovated closet from one of the other rooms, small single bed is all you can fit in it. My parents live only a few doors down, got the whole living room walls and ceiling plastered for £260 I think it was last year.
For the loan amount, not done an awful lot of research, had a really small loan once about 8 years ago. What I have done was use a few comparison websites to get an idea of figures, 10K 10 years, 4.9% £105. 15K 10 years, 4.9% £158 and finally I noticed the APR shows significantly lower over 7 years, 15K 7 years £198 3.0%.
I'm guessing the APR, if accepted could be subject to change depending on your credit file?
15K is probably a pipe dream to be honest, it'd be nice if I could get it. Do the whole house up as I want it, and not after worry about updating it until well after the loan had been paid off. Probably pay off the card and finance I have with it too.
But, that may very well be too optimistic.0 -
One other question come to think of it.
My current debts are my credit card, with a balance of 2,900.
And I have some finance out too. Was a fixed rate 24 month option. Still got 22 payments left.
The mortgage guys weren't able to find anything about this finance, so that's unlikely to make a difference.
If I manage to save up a grand a month over the next few months and had enough to pay off my credit card before I got the keys. Would you pay off the card which may (or may not) give me a better chance of getting a loan. Or would you keep the saved cash to spend on the house and continue making minimum payments towards the credit card (after the house is sorted that would be my first priority to clear).0 -
what is the interest rate on the card? what would the interest rate be on your savings?
as a starting point gauge what is possible on total debt = not over 50% of income...for example if your salary is £20k then that would be around £10k total
currently you have over £4k (including 22 x £56) so would probably be looking at £6k loan
We moved almost 2 years ago and have been saving madly for the renovation work. Initially saved for house deposit, cut back on everything (packed lunches for work, no fancy coffees) did car boot sales and eBay. I worked on spreadsheets so could watch it growing.
Fortunately the house is liveable just not our taste. We did the boiler and the shower last year and have spent on the architect, structural engineer and planning (so £6k spent to date) and have now finished saving for the rest of the work...just trying to get a builder that can do stuff before 2018
Have you checked all 3 of your credit reports for the finance, it may be they may not report to all 30 -
FirstTimeBuyerRenovation wrote: »15K is probably a pipe dream to be honest, it'd be nice if I could get it.
The fact that you are thinking like this suggests that you are looking at it from the wrong direction. You seem to be thinking about how great it would be to have all that money to spend, rather than how difficult it ~could~ be to repay all that money if things don't go quite as you expect.
It sounds as though you are on a contract where the hours available could go down, just as easily as they have recently gone up. You need to think about how you would manage if the company hit difficult times and cut your hours back to 25 hours per week.
Opinion only: in your position you should be looking to borrow the absolute minimum that you need to get the immediate priority items fixed. If you find in a years time that you need more, you should know better by then what you can afford, and the fact that you have paid off your credit cards and have a record of successfully paying a small loan will stand you in good stead for a second loan at a decent rate.0 -
Having your own home, is so much better than any other arrangement, you should be very happy. That means you can cope with the state it is in. Remember the old adage, "Third class riding is better than first class walking".
I'd suggesting waiting a month, or 3, or 6. Enjoy your new-found independence, and don't take on another major investment while the ink is still damp on your mortgage contract.
A home of your own makes serious dating much easier, and perhaps you want to impress a future partner. They won't be impressed if you have no money to go out and meet them, and for the carpets and paper, they might like to have a say ; or it can be a suggestive question if you ask their opinion.0 -
I would not go for such a large unsecured loan just after taking out a mortgage. You would do better to wait a few months and see how much it really costs to pay your own bills etc given that you have been living with your parents until now. Maybe do the renovations over a shorter period and focus on saving as much as possible between now and moving in to cover the initial cost of essential renovations.
I also think you would be unlikely to get one to be honest particularly at the rate you quote.I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.0 -
The first few lenders didnt decline you because of your score as they can't see the score that only you can see.
Maybe the advisor meant you scored low based on the information you provided and your credit file.0
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