Tough choice!

asajoseph

Hoping some of you guys will be able to offer some advice on how best to proceed. Myself & my partner are looking at a property that we’d like to buy, and I’m in the process of selling my flat in order to finance this. However, due to some old credit issues my partner has, we’ve had a few problems.

First a bit of background.

Me
Salary: £53k + discretionary bonus (£4k last year – but much lower than usual due to credit crunch)
No historic credit issues
Experian Credit Report shows £3k of outstanding debt (which affected my score). Of this, £2k was work related expenses, and has now been paid off (was only outstanding for a few weeks), and around £500 of the remainder has also been paid off. I expect this to be amended on my credit file within the next 6 weeks.

My Partner
Salary: £32k
Credit problems dating back 5 years, including one default in January 2004, settled in Feb 2004. A number of other late payments, but all over 5 years old. Excellent credit record in intervening period (Feb 04 – today).
No outstanding debt, uses her credit card but pays off full balance every month.

What we’re looking for
Property on the market for £450k, with our offer of £432k currently ‘on the table’
Lease on the property has 78 years to run – current owners have been quoted £16k to extend
£125-135k equity in my property (depending on sale price)
£15k ‘gift’ from her parents, plus potential access to a ‘loan’ from her parents for a further £30k, if we need it to make up the difference.

We have two failed joint applications through Abbey, that were rejected because of the default on her record, over 5 ½ years old – we were badly advised by their branch mortgage advisor. We’ve been talking to an IFA, and the way I see it we have two options:

1) Halifax – sole application based upon MY salary & credit.

Pros:
· According to my IFA, they’ll offer me 5 x my basic salary, + 3 x bonus, if I come back with an ‘A’ or ‘B’ pass, i.e. £277k
· Can leave my partner off the mortgage application – high chance of approval
· Allows us flexibility to extend lease at later date, when my partner’s credit record is repaired.
· Will offer an agreement in principle, and my IFA will deal with the paperwork

Cons:
· What if they don’t offer me that multiple (it seems high), especially as my credit file currently shows £3k debt (even if it’s been paid off)?
· Property will be in my name only initiailly.
· Later complications with regards to equity transfer, when I look to increase the mortgage and put the property jointly in my partner’s name
· Leaves us with little flexibility in the short term, and means that we wouldn’t have a great deal of money to spend on furniture etc (though obviously with a lower mortgage, we’d have lots of disposable income).

2) Natwest – Joint application, with her bank.

Pros:
· We’d only need a low multiple (3.5 x joint salary, max), to give us all the money we need, & plenty of flexibility if our first choice doesn't work out
· Mortgage & property could be in joint name from the start
· No need to increase the mortgage at a later date
· Wouldn’t need to borrow significantly from her parents.

Cons:
· It needs her credit record – would they refuse because of the default? And then I’d be struggling to get an approval on a sole basis
· No agreements in principle
· Have to deal direct with the branch

I know that’s long-winded, but I’d really appreciate your thoughts!
Thanks

_Andy_

There's no way Halifax will do multiple for you unless of course the broker is intending a dodgy fast track application.

asajoseph

Are you sure about that?

The affordability calculator on their website suggests a multiple very close to that, and I've no reason to think that my broker's access wouldn't be slightly higher, OR that he'd be dishonest.

_Andy_

Sorry my bad - I had looked at your partner's income - apologies.

getmore4less

If all the defaults are around 5.5 years old why not wait 6 months

asajoseph

Well, if we can't get a mortgage now then I guess that's what we'll end up doing.

However, I don't really see the harm in trying now, right?

Also, whilst she spends most of her time at my flat, it really is too small for two people to share, and as of November she will have nowhere else to go. 6 months would be manageable, of course, but moving now would be ideal.

asajoseph

I guess I'd summarise the choice as follows:

Which of these possibilities is more likely:

1) Halifax do indeed offer £277k (5 x my salary + 3 x my bonus), and my (now paid off) credit card debt does not affect the quality of my credit 'pass'.

2) Natwest, my partner's bank, are happy to lend a low multiple, on a less than 75% LTV, and overlook the 5 1/2 year old default on her record.

Anyone got any experience?

Milliewilly

I am surprised they are taking bonuses into account if its not guaranteed.

asajoseph

Sorry to ask, but has anyone at all got any thoughts on this?