Hoping to get a mortgage, help!!!

tintin1984

Hi guys,

I'm really new to wrting on these threads so please bare with me if I'm being thick. I'm hoping for some help, so here goes....

I'm currently living in a house with my partner, owned by my parents. The house is worth appx. £230,000. My parents are willing to sell it to us for £130,000, purely to cover their outstanding mortgage. Heres where it gets tricky. We have alot of unsecured outstanding debt (personal loans, credit cards etc) appx £40,000 worth. Obviously they wont let us have a mortgage with all this debt and it really is choking us financially at the moment. We're left totally skint each month. We have never had a CCJ or been bankrupt, but still do not have good credit files.

What are the chances that we could take out a mortgage for £170,000 with the intention of using the additional £40,000 to cover all our debts. We would then have one much lower mortgage payment each month and have the added benefit of finally owning our home. My parents are willing to be gaurantors also and there really are no problems wth them getting credit at all.

So if anyone has any advice, knowledge or insights they could offer it would be truly appreciated.

Thanks, Bill

thriftymomma

What sort of deposit could you muster up? You'd be hard pushed to get anything without one. Also what income to mortgage ratio are you looking at?

Elspeth

You're asking what the chances are of you being able to borrow £170,000 against a property being sold to you for £130,000.

I'd say (although I'm no expert) your chances, in today's world, are nil. As I understand it no lender is at present prepared to lend more than 100% of the property value (or sale price, even if in your case you would be buying the property for a reduced price).

So I don't think you would be able to borrow 'extra' against the house to pay off your existing debts, and as you've said, the lender will look at how much debt you have already in considering how much to lend you.

And you would need at least some deposit (10% minimum unless your parents are in a position to tie up 20% with Lloyds in which case you'd still need 5%), and you'd need yet more cash to pay for stamp duty, solicitors and other buying costs.

The folks on the Debt Free Wannabee board will be able to give you lots of advice on how to reduce your outgoings to reduce your debts and do some savings, if you post details of your finances.

Shimmyhill

Elspeth wrote: »

You're asking what the chances are of you being able to borrow £170,000 against a property being sold to you for £130,000.

If the house is valued at 230k, they are wanting to borrow 170k so a LTV of around 75%

That is as far as i understand the OP situation tho, how the debts can be worked into the mortgage etc is something i have no idea about !

Elspeth

"Loan to value (LTV)
Loan to value is the proportion of the value or price of the property (whichever is the lower), that you borrow on a mortgage. For example, a £90,000 mortgage on a house valued at £100,000 would mean a LTV of 90%."

From Halifax, but my understanding is that this the common practice. So the lender would use the figure of £130,000 and work out the percentage from there.

I may be wrong though, and you could easily check my calling one of the brokers that Martin suggests.

Oh and I've just found this nice explanation and rationale.

IRWM

What will probably happen is that the lender will take the sale price, £130k. So you will need a deposit ok. maybe 10% it doesnt really matter as ill explain.

10% deposit, as at 90% LTV, the mortgage rates are usually better, take a SVR (standard variable rate) mortgage out so no tie ins and little up front costs (usually no booking fee).

Then when it all goes through you can have the house re valued, the lender will then have you down as owing £117k (£13k deposit, 130k purchase price) on a house valued at £230k. You can then look at taking out a further advance for debt consolidation upto about 75% usually, thats you sorted to £172k, and your deposit money back. A further advance usually brings the same sort of rates that are applied to a mortgage or you can be sure they'll be lower than what your paying. Just be carefull, your putting your unsecured debt to a secured debt and the house may be at risk if you fail to pay. also you are putting the debt over a much longer period and thus paying more in interest.

This ofc is just my opinion and one of many options that may be open to you. It may certainly not be the best.