Buying a house from parents 7 worried about bad debt

Robocod

Whoops, title should read: Buying a house from parents & worried about bad debt

Ok.


Where to start?


Hello everyone, this is my first post and I apologise if it’s a bit on the long side. I’m gonna try to give you plenty of details and see if you can give me any advice.

Myself and my partner have just moved into our new house from a rented flat. The house was recommended to us by a friend as it was going up for auction at a great price due to it being repossessed from a building company who went under.

I initially rejected the idea outright. My partner is still at uni and so we didn't feel we were in a position to take on a mortgage yet.

However, my parents kindly stepped in and took out a loan on the equity in their own house for which they have paid off the mortgage. They bought the house at what was an absolute knock down price of £130,000 (real value approx £195,000). We have been living here since May 1


The stipulation of this agreement was that we pay the loan payments until my girlfriend finished uni and then we buy the house from them.

Well my girlfriend will be finished in September and has started applying for jobs.

The problem is that she has several bad debts from about ten years ago, for store cards and council tax (£2000 approx) and has not been able to get any sort of credit whatsoever since we met.

I myself have 2 bad debts to Scottish Power and British gas for £150 and £250 respectively. Although I have been able to obtain credit for a phone contract and a car recently.

We also have a £1500 Lawyers bill to pay . What sort of affect will all this have on our ability to get a mortgage? And if we do manage to get one, will it be at a higher rate?

Also does the fact that we’re purchasing from my parents put us in a better position with deposits etc?

I was thinking of contacting Equifax then taking out a loan (if I can get credit for one) and paying absolutely everything off. Then taking out the mortgage for say £140,000 and paying the loan off.

Is this the right thing to do? I am beginning to panic big time about all this.

Any advice whatsoever is appreciated.

Thanks.

Chris.

Also as an aside, I tried contacting Equifax online a while back and after typing in all my details it advised me to phone them on an 0845 number. However once I got through to the automated system, there was no way of actually speaking to someone in person. Has anyone else found this??

McKneff

anytime anyone gives you an 0845/44/70 number go to the website saynoto0870 and get a generic number.
These 08 numbers annoy me so much as they are income generated and they get paid for you ringing them. huh

Sorry, cant help with the other business but hope things go alright for you.

themanbearpig

Absolutely no chance in the current climate. Lenders will throw your application in the bin.

Robocod

themanbearpig wrote: »

Absolutely no chance in the current climate. Lenders will throw your application in the bin.

What? Even if I have all the bad debts paid off before I apply for the mortgage?

superfran_uk

They'll remain on your credit report. Obviously paying them off is a good start , but lenders are looking for any reason NOT to lend at the moment and defaults are a huge indication that you can't be trusted with their money. This may settle down soon, but I wouldn't bank on it (oooh sorry about the pun).

Your best bet is to
a) Pay them off
b) Work on and improve both of your credit reports - more advice in another forum i believe?

Mrs_Bumble

Get a copy of your credit report from equifax or experian, so that you can see how bad your profile actually looks.

What is the lawyer bill for and has he registered this as bad debt on your credit file?

ARe your girlfriends bad debts settled? Check whether they are showing on her credit file when you get it.

Was your girlfriend working at all whilst at uni? Or was she working part time? I suspect that was the reason she couldn't obtain credit.

Have you been able to settle your bad debts with scottish power etc?

Absolutely do not take out a loan to repay everything.

Get a copy of your credit report as a first.

Get your girlfriend back to work and both of you pay everything off, put money aside for deposit, legal costs for repaying your parents and in the meantime have a word with your parents and just be honest with them and ask them to give you a bit more time, you are paying the mortgage at present aren't you? So will they be against giving you a little more time to get the other things paid off?

You can get a copy of your credit file from any of these:

http://www.checkmyfile.com/
http://www.experian.co.uk/
http://www.equifax.co.uk/

Robocod

Mrs_Bumble wrote: »

Get a copy of your credit report from equifax or experian, so that you can see how bad your profile actually looks.

What is the lawyer bill for and has he registered this as bad debt on your credit file?

ARe your girlfriends bad debts settled? Check whether they are showing on her credit file when you get it.

Was your girlfriend working at all whilst at uni? Or was she working part time? I suspect that was the reason she couldn't obtain credit.

Have you been able to settle your bad debts with scottish power etc?

Absolutely do not take out a loan to repay everything.

Get a copy of your credit report as a first.

Get your girlfriend back to work and both of you pay everything off, put money aside for deposit, legal costs for repaying your parents and in the meantime have a word with your parents and just be honest with them and ask them to give you a bit more time, you are paying the mortgage at present aren't you? So will they be against giving you a little more time to get the other things paid off?

You can get a copy of your credit file from any of these:

The lawyers bill is from when my parents bought the property, its not a bad debt in any way. It just came through the post this week.

My girlfriends debts are not settled. She still gets letters through from credit agencies.

She was doing a nursing degree and doing occasional shifts with various nursing agencies.

Haven't settled my outstanding Scottish Power and British Gas bills yet as we have spent a fortune decorating the house.

Is taking out the loan a terrible idea?

When I spoke to the mortgage advisor at the bank informally she almost bit my hand off when I told her that we were buying the property from my parents.

She said that we can work it so that we appear to have a 25% deposit and therefore get a better rate.

If I pay these debts off, whow long do you reckon before a lender will go near us?

carefullycautious

Cripes were your parents aware of your bad debts before parting with all that money. If you were my son I would not be impressed if you withheld that kind of information :mad:

Robocod

carefullycautious wrote: »

Cripes were your parents aware of your bad debts before parting with all that money. If you were my son I would not be impressed if you withheld that kind of information :mad:

To be honest with you, they were the ones who twisted my arm into buying it.

I knocked the deal back but the person who told me about it was a family friend and spoke to them about it.

They said it would be criminal to let it slip through our fingers at the price we were getting it for.

At the end of the day, if this goes belly up, we can move back into rented accomodation and they can sell it at a very tidy profit.

It is an amazing property far beyond anything we could ever afford on our meagre NHS salaries.

I know it wont come to that, I'm pretty sure we will sort something out.

Ian_W

Haven't settled my outstanding Scottish Power and British Gas bills yet as we have spent a fortune decorating the house.

If I was a lender that type of statement would have the alarm bells ringing so loud I'd have a headache!!
Why spend a fortune on something cosmetic when you have outstanding debts that are trashing your credit rating??????

To be honest, and I'm no expert, 2yrs ago you'd have probably got liar loan sub-prime arrangement at a hefty interest rate but now I doubt you'll get a mortgage until you've repaired your credit ratings and that ain't gonna happen any time soon!!

Did the advisor at the bank know about your and gf's credit rating? I feel she'd have been mighty quick to regurgitate said hand if she had! I think you need to speak to a whole of market mortgage broker to see what they suggest and understand a timescale when you might be able to get a mortgage.

When they give you bad news - get your parents back in the loop, as they may be waiting a while longer than they think. They can decide then whether to sell for the tidy profit or hang fire.

Caz3121

What is your income? is your girlfriend working currently - you said she has started applying for jobs. Even if you could get a mortgage you would need a salary of approx £45k to get that size of mortgage