Bad credit

Buy_to_let

My partner and I have a flat that we want to rent out and then we want to get a house. We recently applied to get a buy-to-let mortgage but we've been turned down due to my partners bad credit rating! He had two defaults on his credit rating dating back to 2003. I beleive that these only stay on your file for 6 years so are due to come off in Oct 09. What are we best to do wait until Oct and re-apply of should I take him off the current mortgage and apply on my own? help i don't know what to do.

luckyfool

What loan to value do you require on the buy to let? Were the defaults paid back and cleared some time ago, or are they still outstanding?

herbiesjp

Also, what is the mortgage amount needed and the expected rental income?

poppy10_2

Do you own your own home currently? How much equity do you have?

Buy_to_let

The flat has been valued at £65,000 - £75,000. We bought it off the council in 2006 for £31,000 and now only owe £16,000.

The defaults are still outstanding.

We want to get a property for about £100,000.

The rental income we have been told to expect on the flat is £450 pm.

We own our home.

Thanks

luckyfool

Are you applying to get funds out of your property to use as a deposit for the purchase?

There are one or two "sub prime" lenders that might consider it as a buy to let, also maybe a couple of niche prime lenders that might look at it. Otherwise remortgaging to buy to let in your name only might also be viable (though there would be additional legal costs to do a transfer of equity to remove him).

Buy_to_let

Hi,

Yes we are applying to get funds out of the flat to use as a deposit for the house.

What is a sub prim lender? and a niche prime lender?

How would we arrange a transfer of equity to remove my partner? is this though a solicitors?

Thanks for your help.

luckyfool

Buy_to_let wrote: »

Hi,

Yes we are applying to get funds out of the flat to use as a deposit for the house.

What is a sub prim lender? and a niche prime lender?

How would we arrange a transfer of equity to remove my partner? is this though a solicitors?

Thanks for your help.

The transfer of equity (TOE) is the term for the additional legal work required to change the names on the title deeds of the property so that it can be remortgaged into one name only. It can be done by the solicitor doing the mortgage legal work at the same time, but will normally incur extra costs (i.e. if the legal work was free and paid for the lender then you get charged separately for the TOE, or if you have appointed your own solicitor then the fee is just that bit higher for the additional work).

Sub Prime Lender - or non-conforming lender basically means a lender that will consider sub/less than prime candidates for a mortgage. i.e. people with a poor credit history, or who require self certification of income would all be considered "sub-prime". depending on the exact details it used to be quite common to be able to place people with minor adverse credit with high street lenders like Abbey or Chelsea as long as they had a reasonable deposit (it's partly down to this flexibility in their criteria that Chelsea have been in a bit of bother just now, as their mortgage loan book is of low quality and they are experiencing arrears problems). In the current market lenders are much much tighter so it is more likely that you would need an actual specialist "sub prime" lender. Examples would be Beacon Homeloans, MBS Lending, Platform and maybe one or two others (where there used to be 30+ fighting it out for business in this sector, now there are only 4 or 5).

Niche Prime - this would tend to be prime high street lenders that manually underwrite cases and look for slightly unusual or niche cases which might not fit with a normal high street lender, but for the right case they will do a deal (perhaps at a marginally higher rate than normal). i.e. with a good explanation for minor adverse, a big deposit, good provable income and conduct on a current mortgage, and perhaps the opportunity to look at 6 months bank statements to verify that you are currently managing finances well then such a lender might be willing to offer "prime" high street rates. Typically these lenders do not "Credit Score" cases, but look at them on a case by case basis.

For either of the above scenarios you really need a good broker who can navigate to the right option for your circumstances, and can make the case the lender on your behalf.

Buy_to_let

I think we'd be more inclined to do the TOE, roughly how much would it cost to do this though a solicitor?

or are we best to wait until the defaults come off his credit rating in six months and apply again?

luckyfool

If you can wait then wait. I would expect you to be looking at an extra £300 or so for the TOE at the same time as the remortgage.

Buy_to_let

is it guaranteed that defaults come off after 6 years? so there would be no record of these on his credit file after this?

If i do the TOE, do you think the bank will allow me to re-apply on my own? my money will cover the amounts.