Mortgage and Debt advice please

dooney

Hello, please could you help or advise - my husband and I would like to purchase a house for £85,000. My husband has debt of £5000 with his ex wife (this was taken out in 1995), until recently, after we recieved experian report, we were unaware they had been a default on the account in Jan of this year (we pay agreed amount on a regular montly basis) hence causing huge financial implications for us. We went to Halifax for mortgage and they went to Birmingham midshire who offered us 75% of mortgage at rate of 7.89 over 20 years, at present 25% deposit is out of our reach, so we went to HSBC who declined our application. After trying the high street banks we sought an independent broker, who recommended first national, who offered us 80% of mortgage at a rate of 9.6 over 25 years, although 20% deposit is more reachable the rate seemed very high.

So I have posted on here in hope someone has any ideas or advice for us,
many thanks dooney

could i add another question;

Is anyone aware of the effect of credit score if we cleared the debt in full? I am reluctant to pay for my husband and ex wife debt but I am just thinking of alternatives available to us and would we benefit straight away when finding a mortgage. Apparently the debt can't be split between his ex wife so we getting bad credit score due to ex wife defaulting on payment.

Thanks again dooney

Mrs_T_5

are you able to take a tracker mortgage or do you want fixed to ensure your monthly payments.
Surely if you are regularly paying off the debt then i don't see why you should be able to get a mortgage offer.

I am sure that there will be plenty of knowlegable money savers who can help you out with ideas and advice - hoping you get some help

mrs t

herbiesjp

How much is the default for?

Have you spoken to a whole of market broker about your situation?

dooney

Hi thanks for your replies:

Mrs T we would prefer a fixed rate mortgage initally as the house we would like needs alot of work doing to put it right.

Herbiesjp - When my huband seperated from his ex wife he sought advice from CAB regarding his joint debt and agreed his payment with the loan company the account was frozen and intrest was ceased. We do not know the arrangement his ex wife has with the company regarding her payments. On the experian report its defaulted £5063 in January this year.

We went to the whole of market broker and explained situation to seek his advice and the best deal he could find was first national.

Mrs_T_5

dooney

what caused the default in january?

what was the advice from the whole of mortgage broker?
i take it that you do not have a property to sell as you don't mention an existing mortgage provider?

mrs t

Mrs_T_5

could i add another question;

Is anyone aware of the effect of credit score if we cleared the debt in full? I am reluctant to pay for my husband and ex wife debt but I am just thinking of alternatives available to us and would we benefit straight away when finding a mortgage. Apparently the debt can't be split between his ex wife so we getting bad credit score due to ex wife defaulting on payment.

Thanks again dooney

sorry i was not reading properly - hopefully there will be an experienced and subject knowledgable person along soon to help you out with your problem

Mrs_T_5

bump

hope you get some help!

dooney

Thanks Mrs T - I hope someone can help - First time we went to mortgage broker we discussed the debt and explained we sent for experian report he found us a mortgage with the abbey and we were delighted although he did say they may need more information, 3 days later we provided more information - cutting along story short we got a mortgage in principle letter and put offer in on 3 bedroomed property which was declined, so i made an appointment to see mortgage broker to discuss costs of home and contents and life assurance to ensure we could afford payments, (thus allowing us to put in a higher offer for house). It was then we noticed the broker had went to another lender first national without prior knowledge - so we recieved a mortgage in principle from first national when we thought it was abbey in my naivity I thought abbey's lender was first national - so now we are reluctant to place another offer for the property.

getmore4less

I think there are two things that need doing.

A plan to sort out this debt with the ex. It is going to stay as a default untill it is sorted there comes a point when it might be worth just paying it off.

What sort of house prices are we talking about? Having to pay 3% over the odds on a big loan will cost loads more in the long run.

Second and probably more important is wait, prices will fall by more than the £5k owing and that nearly 20% deposit will become 25% so you can get a better deal. or even find one that does nt need so much work.

There is no need rush buying houses these days

dooney

Hi thanks for the reply, there is no way of sorting out this debt with the ex wife, she doesnt want to know to be honest - she has her own credit agreement with their creditor. This is where the problem initally started not paying the repayments.
I have never been in debt and I find it difficult to have to pay another persons debt especially when it was her fault, however my husband sought advice when leaving his ex wife and that agreement made with the creditors remains, his ex wife has her own agreement, the marriage ended due to financial implications and my husband only speaks if needed regarding their son.
We would like to purchase a house for £85,000 as we know we can comfortably afford the payments and bills.
Also we need to purchase a 3 bed property due to my husband's son being 17 years of age and our son being 2 years of age. We are currently living in a 2 bedroomed house with our son sharing a room with us.
thanks again dooney

getmore4less

dooney wrote: »

Hi thanks for the reply, there is no way of sorting out this debt with the ex wife, she doesnt want to know to be honest - she has her own credit agreement with their creditor. This is where the problem initally started not paying the repayments.
I have never been in debt and I find it difficult to have to pay another persons debt especially when it was her fault, however my husband sought advice when leaving his ex wife and that agreement made with the creditors remains, his ex wife has her own agreement, the marriage ended due to financial implications and my husband only speaks if needed regarding their son.
We would like to purchase a house for £85,000 as we know we can comfortably afford the payments and bills.
Also we need to purchase a 3 bed property due to my husband's son being 17 years of age and our son being 2 years of age. We are currently living in a 2 bedroomed house with our son sharing a room with us.
thanks again dooney

The problem with the joint debt with the ex is that it is still joint even though they have seperate agreements, if she is not paying then this will not go away unless it is paid off. Now she is not paying it is unlikely the lender will not keep him liable and eventualy might chase him for the money, this default is there for a long time. You may not like having to pay it off but it may be the best option in the long run currently this is putting a block on your life plans.

Big son is 17 so how long is he going to be around, are you planning more kids, if not you don't need a 3 bed place for long might be better off renting a 3 bed place for a year or two and then looking to buy a 2 bed place once he moves out, prices will have dropped.

Some numbers, £85k purchase, 20% deposit £17k, mortgage £68k.

So a loan that is 3% higher is going to cost £170pm more interest only

So asuming the £5k debt was 50:50 then that is £2.5k extra to pay it off, which is only 15 months extra payments on the higher cost mortgage.

Paying out that £2.5k to remove the financial link(is it the only one left?) with the ex could be worth it in the long run.

It might be worth approaching creditor and offering a full and final eg. offer £2k to clear your hubbies bit and £1k towards the ex debt, they know they will not get any where near that if she has defaulted on the agreed payments. ( ask about option this on the debt board there will be those with better experience on how to approach this.)

This way it will show as settled and eventualy drop off and the financial link with the ex is gone for good, hindsight this was not a good idea keeping this financial link and he should have been warned about the risks when he took advice.

Save up to replace the deposit and look for a better mortgage deal at lower prices in 6 months time. even if you paid the full £5k the £12k left becomes a 20% deposit when prices are £60k a £25k drop which is 30% drop, saving will bridge the gap as priced drop.

I would be very wary of commiting to a high cost mortgage that you could be stuck with for a very long time, I think you may be better off with no deal than a bad deal, many are finding this out now.