1st Time Mortgage and Debt Advice

Len

Lo Ppl,

I'm hoping some of you far better imformed ppl will be able to answer a few basic mortgage related questions/worries for a first time buyer.

Basically my lovely wife and I are looking to buy and are about to sit down and see what mortgage offers we can procure.

My main worry is that the amount of debt we have behind us may scupper any realistic chances of getting the size of mortgage we require.


We currently earn £74,500 pa plus bonuses.

We are looking at flats/houses around the £200,000 - 250,000 mark.

We have a deposit of £20,000.

We have a combined debt of approx £75,000 which consists of credit cards and loans.

We both have good credit ratings.


So what are ppl's views? Do you think any lenders will touch us with those figures or are we looking at a few year of paying off the good times...lol...?

Any and all advice would be very much appreciated.

Thx in advance...

happybroker

with a deposit of £20k you would be looking at a max of £200k purchase price and lenders will be keen as mustard on scores and affordability.

It's a bit of a tricky question to answer with this amount of info as it depends how much on is cc's and how long you are paying it off over. You would be well advised to sit down with a quality broker who should go through things with you before submitting any applications and harming your future chances.

Some lenders will take all of your bonus's, some not so it has to be a good idea to seek some professional help.

Good luck with it, sounds like exciting times.

Len

Hi happybroker!

Many thx for the swift reply.

I can tell you that approx £40k is on ccards on life of balance deals as low as possible (avg around 9%) in order to pay them off.

The rest is on loans, again around the 9% mark.

I shall take your advice and sit down with a broker and have some seriosu discussons before proceeding.

I have made appointmnets to chat to various banks next week but may hang fire now, would this/does this affect my credit score just talking to them about offers...?


p.s. Yes, it is exciting, if a little daunting!

luckyfool

Len wrote: »

Hi happybroker!

Many thx for the swift reply.

I can tell you that approx £40k is on ccards on life of balance deals as low as possible (avg around 9%) in order to pay them off.

The rest is on loans, again around the 9% mark.

I shall take your advice and sit down with a broker and have some seriosu discussons before proceeding.

I have made appointmnets to chat to various banks next week but may hang fire now, would this/does this affect my credit score just talking to them about offers...?


p.s. Yes, it is exciting, if a little daunting!

That is a relatively high level of credit. Lenders will take your monthly payments to all the loans, add them to 3% of your outstanding credit card debt (£1200) and then annualise that figure before deducting it from your salary. i.e. If your loan payments were 900 a month then they would take £25,200 off your salaries before looking at affordability.

Given your high incomes that would probably not knock you out completely, however having large amounts of credit, especially if it is on credit cards at or close to their limits can impact negatively on your credit score, and borrowing 90% may prove to be a stretch too far (the scores required at this level tend to be very tough).

How have you run up that amount of unsecured credit, and saved 20k for a deposit at the same time?

Are you looking at a particular type of property, i.e. new build, established etc. Some builders offer equity shares which can mean effective interest free loans (but sharing any increase or decrease in the value of their share) on 25-30% of the property value. This would reduce your mortgage payments, reduce the effective loan to value, and possibly bring a more expensive property into reach (though whether thats a good idea is another matter!). e.g. £200k property, you still put down £20k , and also take a 25% share from the builder. This means your share is £150k and you need a mortgage for £130k. You are borrowing 86.7% of your share, but the mortgage lender will normally treat your mortgage as being 65%, as they get their money back from any sale before the builder so the builder share is effectively treated as a deposit.

Thats just one scenario, I don't know your full circumstances, have you considered using the £20k to pay down your debt and sitting tight for a period?

Luckyfool

happybroker

My experience of banks (which obviously can't be construed to include every single one !?!) is that they will input your details on the system and then tell you if the computer says yes or no. If this includes carrying out a credit search it can affect future scores and chances of being accepted else where I'm afraid.
Certainly you need to consider future affordability in this situation if you are able to get a mortgage so have a think about when the loans finish and look at the possibility of making sure things are stable until then with the mortgage payment.

happybroker

oops.........check this one out Len http://forums.moneysavingexpert.com/showthread.html?t=1641369

a case in point!!

herbiesjp

There are a lot of things here that would need to be discussed in detail.

As there are a lot of things that difeerent lenders will treat differently i.e. incomes, deposit, loans, credit cards etc to name a few

In terms of your current commitments you would really need to give a breakdown of each individual element to the broker you speak to - not only will it help to look at your affordability taking into account the mortgage, but it will also help to see how the lender will treat each individual loan/cc.

You need to realise that at 90%, the rates offered are not the leadline rates you see all over the place, but rather the uncompetitive deals, as the lenders offering them know they are in a niche market and have no incentive to lower them.

Bottom line is, is it all affordable to you? You could only work this out once you have discussed with a broker and seen what impact the mortgage would have on your monthly disposable income

And don't forget that if looking at a newbuild property you will have very limited options at 90%

Len

Hi Everyone,

Many thanks for all the constructive advice offered here.

I shall sit down with my good wife and discuss and digest it all and maybe get back to you.

It's slightly confusing to say the least.

happybroker: I saw that thread before which is why I asked.

Luckyfool: The honest answer is easily regards running the debt up and had wedding presents and family loans towards the deposit on top of what we already had.