So much Debt & want to buy house- any way out?

nocashkate

Hello all, just joined this forum and i wanted some advice please!

I have lots of debt (20,000) in graduate loan and credit cards and another 2 small loans. Most of these are from when I left college and lived a lifestyle i couldnt afford.

I now have settled job, earn pretty good money and rent a house. I havent got in anymore debt in last year but have only paid one card off, i am not late with payments(have been in past) and have no CCJ's /defaults.

The problem is this: i would like lower arp's to lower my interest and pay off quicker but get declined for credit (recent thing) even though credit check from Exquifax is excellent (waiting for Experian to come through) also, my partner and i want to buy but have v small deposit (2,500) and he also has bit of debt from college/travelling etc.

We pay £800 rent so surely we could afford a mortgage? but will lenders agree or will my credit score (and big debt) let me down??

I plan to pay off all credit cards by this time next year (i have £600 a month left to live on so i HOPE i can do this:j )

Would it be silly to get 95% or 100% mortgage or is renting a waste??

I fel so confused about what is best and ashamed i have so much debt and for what?? Too many nights out and shopping for things i dont need!!

Any advice welcome -thanks so much in advance

lynzpower

I bought a flat when in debt & it was one of the worst ideas Ive had. Also to mention that my lenders added up my debt multiplied it 3 times and deducted it from what they would lend me- not pretty..

There is no quick way I dont think, if there is, i certainly havent found it.

climbgirl

I don't think you're in a position to buy a place yet - if your credit score is bad (which it probably is if you're getting declined for cards) then getting a decent mortgage isn't going to be easy.

And you have nothing in the way of a deposit (don't forget survey fees, lawyer's fees etc, £2500 won't go far).

I think you're better off paying off more (if not all) of your debt first and getting together a decent deposit. Yes you can probably meet most mortgage repayments with your £800 in rent, but there's more to buying a house than that.

nocashkate

Thanks for advice:j You are right, it is best to pay off first.

Do people generally feel 100% mortgages are bad idea tho? It is obviously not easy to save £10,000 + and paying that much in rent over next year!

Maybe best to move back to mums.......and start saving.

Thanks again

Dr.Lou

I'd be very cautious too. When my OH and I bought a house a few years ago, we did have student loans (totalling about £7K) left to pay off, but we had a good 10% deposit and enough money saved to pay all the other accociated costs. You could always try out the mortgage calculators that most of the banks and building societies have on thier websites ( they also have a section for your debts to be inputted in) to see what figures they come up with. If it were me personally, I'd rather go in with a good deposit (say 10%) to get the best mortgage deals.

dinkylou

Moving back to parents and saving is a great idea. Wish I had had the option.

Buying a house is a big strain, especially financially.

I know each person has their own thoughts but I got a 100% mortgage and the rate for me as a grad wasnt too bad. I got an IFA's advice so I knew what I was getting into.

2 years on I am now able to re-mortgage to a better rate as the LTV has gone down to 80% with the house prices going up.

So no, in the short term I dont think they are so bad.

But definitely get rid of all the debts first if you have the choice, save up a decent deposit.

nocashkate

Thanks......

I dont really have the option either !! But i might be able to persuade my mum, as she lives alone i could pay small amount to her to help her out.

She doesnt know how much debt i have tho and feel really ashamed i havent told her (or anyone but my sister and OH) so might be a good time to kill two birds....

This site is great, as i have felt so alone for ages now and comfort in support from others.

ms_london

When I think about buying somewhere (and it will probably be on my own rather than with an OH, but that's because i've been single forever....:p ), then I will have to raise a HUGE deposit, but I dont mind!! Hopefully by the time I will have a deposit, the house prices may have dropped slightly - but who knows.

I didnt realise that the mortgage lenders took into account the debt you have and deduct it from the amount they'll lend you.. Good idea though!!

Back to the OP. I would definately think about sorting out your finances as they are. Rather than moving back home - could you not find somewhere with cheaper rent?

xx

nocashkate

Gives me inspiration that you are now so good at saving!

Can you tell me what turned it around for you? and how you continue to be motivated to save??

I am trying imagine how good i will feel when debt cleared:j

I think i will cry!
x

Thriftylady

I had 100% mortgage on my first home, and without it there is no way I could have got on the property ladder. And ironically the payments on the mortgage were less than half of what the monthly rent would have been for the same type of house in the same area.

But, and this is a massive but, if your circumstances change for the worse within the first couple of years, as ours did, there is nowhere to turn. Even with the rising house prices we were still in a position where to sell our property would have cost more than keeping it (taking into account all the fees etc), but yet we couldn't afford our monthly outgoings either. So, maybe the best suggestion would be that if you are satisfied that you are in a very secure job (and only you can be the judge of that) then its worth considering. But if, for example, your company is constantly restructuring or your boss is so unbearable that someday you might march out the door before you realise quite what you've done, then its probably best to put up with the pain of not having your own home just yet.

I suppose 100% mortgages could maybe be classed as a 'necessary evil', as in a lot of peoples cases its the cost of the deposit, not the cost of the monthly payments, that make homeowning so unaffordable.

ms_london

nocashkate wrote:

Gives me inspiration that you are now so good at saving!

Can you tell me what turned it around for you? and how you continue to be motivated to save??

I am trying imagine how good i will feel when debt cleared:j

I think i will cry!
x

Wanting to go travelling so much motivated me in becoming debt free as soon as possible to be honest, and since I go in Aug, ive no choice but to save - well I dont have to go with as much if I didnt want to, but since I've saved £900+ every month for the past year, i thought I might as well carry on!!

I think if the banks/CC companies hadnt have stopped all credit then I probably would have carried on as I was, but it forced me into having my lightbulb moment, albeit a slow flicker to start with.

You will feel amazing when your debt is cleared - it just opens up so many possibilites & means you can change your lifestyle without it all having to revolve around money (i.e. not having to stay in a job you hate and things like that)....

You can do it, believe me, if i can, then anybody can!! xx