Mortgage Advice

poppyg_2

Hi

Myself and my partner are in the process of viewing properties, the mortgage would be in my partners name as my credit rating is not great and I also have a property which I intend to rent out so that I can live with my partner

Partner earns £22500 pa and has a property on the market for £125k, it should sell quickly due to its location and he's hoping to get approx £122k for it. He owes £82k on his mortgage so £40kish equity. However, he has debts (car loan and credit card) of around £19k and I understand that from the equity in order to get a mortgage he would need to clear these debts leaving him with approx £20k deposit for a new place. Is this correct, i.e. that all debts need to be cleared from the equity in order to get a mortgage?

We're looking at houses in the region of £125/130k as can get more for your money in the area we're looking at. Would having a £20k deposit for such a house be ok for getting a mortgage?

Thanks

_Andy_

It isn't compulsory for unsecured debts to be cleared, no. That said each mortgage lender will look at any debts in terms of outgoings/affordability when assessing any application.

poppyg_2

Thanks Andy, it's just confusing knowing what to do as obviously if he didnt clear his debts it would potentially mean he had nearly £40k deposit for a £130k which gives a much better LTV, then again obviously it'd be good to have a fresh start of course. He was thinking it would be good to perhaps pay off his car loan with the equity but keep his credit card as he doesnt have to pay too much per month for that

If anyone else has advice/ideas it'd be much appreciated

herbiesjp

Clearing your debts will mean that a lender will be able to use all of your income when looking to agree the maximum mortgage

If there are unsecured debts of £19k, then these annualised monthly commitments will be deducted from the income first, and then any income multiples applied.


So based on his income, he would be able to support that amount of mortgage and unsecured debt


Your partner is close to the maximum mortgage possible on his income, so I would be careful before putting in any offers.

Just to make sure you fit all criteria, and don't get any nasty surprises, I would suggest running it past a whole of market mortgage adviser and making sure a lender will be happy with the scenario

poppyg_2

Thanks Herbies, he does have a mortgage in principle from Halifax, they would like him to clear all his debt with the equity, was just wondering if this was the same with other lenders or whether others may be a little more flexible because i think if anything he would prefer to put a larger amount of his equity into the new property

herbiesjp

You will find most other lenders will want the same as well, due to his income level.

You could get away with the credit card (how much is on that?)

Have you gone direct to Halifax, or is that what has been recommended to you?

You are looking at 85% deals, so income multiples will be tight, and rates available not the lowest.

poppyg_2

Hi

His loan is £13k and credit card £5k (he's just transferred his o/d to it)

Mortgage in principle is via mortgage broker at the estate agents so I was a little unsure as to how independant they are and also how much of the market she actually looked at, do you think it'd be worth him approaching a whole of market broker to compare?

Thanks again for your advice

herbiesjp

Definitely worth a second opinion, especially if you can find a fee free one

getmore4less

poppyg wrote: »

Hi

Myself and my partner are in the process of viewing properties, the mortgage would be in my partners name as my credit rating is not great and I also have a property which I intend to rent out so that I can live with my partner

Partner earns £22500 pa and has a property on the market for £125k, it should sell quickly due to its location and he's hoping to get approx £122k for it. He owes £82k on his mortgage so £40kish equity. However, he has debts (car loan and credit card) of around £19k and I understand that from the equity in order to get a mortgage he would need to clear these debts leaving him with approx £20k deposit for a new place. Is this correct, i.e. that all debts need to be cleared from the equity in order to get a mortgage?

We're looking at houses in the region of £125/130k as can get more for your money in the area we're looking at. Would having a £20k deposit for such a house be ok for getting a mortgage?

Thanks

Thats a lot of cost(seeling,buying,moving etc) for a small jump in value,

Can you not share the place, save hard to pay off the debts, fix up your credit, make sure your places rents before doing this then you will be able to make a better move in a year or two.

silvercar

I also have a property which I intend to rent out so that I can live with my partner

Have you got permission from your lender to let out your property?