Do we need a sub-prime mortgage?

Moopoo

Urgent query - please help!

We are currently trying to buy a property costing £250k. We have £40k savings. However we would prefer to use only £30k as a deposit and keep the remaining 10k to pay off a car loan, a £900 catalogue account and to pay for the costs/stamp duty.

Our joint annual income is £55,500. Our other outgoings consist of a personal loan which is £250 per month and credit card debt of approx £5k costing around £100 a month. If we don't pay off my car loan/catalogue bill it will add a further £300 per mth to our outgoings.

My partner already owns a property valued at £155k with a £112 mortgage, just under £500 per month. This is rented out and covers the mortgage (rented for £700 per month).

The difficulty is that I have a default for approx £400 on my file from around 18 months ago following an insurance dispute with Orange. This has since been satisfied (begrudgingly) but we have been told that nearly all lenders won't consider people with credit problems less than 3 years old. My partners file is spotless.

We were accepted by Standard Life but only for £210 total purchase price.

Is it unlikely that we will find a lender willing to lend us the £250k we need under these conditions?

Any advice would be appreciated!

_Andy_

Moopoo wrote: »

Is it unlikely that we will find a lender willing to lend us the £250k we need under these conditions?

Any advice would be appreciated!

Just to clarify - it's £220k you need to borrow surely? Property value - £250k, £30k deposit?

herbiesjp

You need a lender to agree a £220k mortgage based on a £250k purchase price

The £400k default will cause problems with a few lenders, however there may be other lenders who could "ignore" that default based on the low amount and a good explantion as to why it happened.

You might be better placed going via a broker who will know which lenders will be more flexible in agreeing this for you

Toughluck

Chelsea will do up to 90% LTV with £3000 worth of satisfied defaults. Income multiples are at least 4 x joint.

The £400 default is above the £250 limit most high street lenders will allow. 90% with defaults is mainly a no-no, but it is easily overcome.

minimike2

I would second Toughluck about Chelsea - they are pretty flexible with this scenario - you are best going direct to them though as they dont offer thier full prodcut range through brokers.

Also

Moopoo

Yes sorry it is £220k we need.

Our IFA has told us that we should either find something cheaper or get an Interest Only deal with a sub-prime lender using the whole £40k as deposit.

This house is too good to miss so we really like to do it if we can! Just obviously wary of applying to (and being turned down by) too many lenders.

So you think Chelsea might be worth speaking to then?

herbiesjp

Chelsea could indeed be one option - however you would really need to look across the market place to find which lender would accept your application and offer you the best rate

Toughluck

Your IFA is talking crap.

As mike said, go direct to Chelsea, they only offer 2 year discounts @ 6.24% thru brokers. Going direct you will fit their standard schemes and they have fixed rates direct if that floats your boat. You'll be able to find out their adverse criteria on line anyway to reassure yourself.

Just noticed they go up to 95% direct, but there will be a higher lending charge. Rate 5.89% 2 yr fix £1500 fee. Bargain if you don't mind me saying so.

Toughluck

Need to add that the rate i said is for existing borrowers.

It;ll be 6.25% with a 1.5% fee or 6.49% with £995 fee. Based on your loan size a fee based product would be better.

Moopoo

I just had an informal chat with one of their advisors and sadly our earnings/outgoings figure means they would only be prepared to lend around £187k. They did say the default could probably be overlooked tho so that's something.

Back to the drawing board then....

minimike2

Booo. Was that with those other bits paid off that you said about initially?