Increasing borrowing power?

Doglover

Hi everyone, I have a few questions which I'm hoping some on you may be able to help with (or at least push me in the right direction).

1) Do mortgage companies ever take into account the income of another person living with you but not named on the mortgage? My partner is unable to get credit due to previous bad credit (recently completed IVA); he owes nothing now and has a good income therefore, our paying powers are greater than my borrowing powers.

2) Do gurantors have to be earning money or can they provide a gurantee on the strength of their own home without a mortgage? If yes, are there any guidelines?

3) Am I correct in thinking that my partner and I would be better off (and possibly have to) waiting 3 years from when the IVA was due to be completed before we apply for joint mortgage finance?

Please don't shoot me down for asking these questions as I am only mooting possible ideas to gauge which direction we should be heading towards. We already have savings which will keep growing and I understand the more the better. I already have a mortgage with equity in the region on £25K (based on mortgage Co's current index valuation) so I know we're heading in the right direction. I am simply looking at ideas of getting to our forever home sooner if it is at all possible.

Thanks a lot

happybroker

g'tors need to be able to evidence their ability to service the debt so no, if they don't have an income it would be of no use to you I'm afraid.

There are deals out there that will allow income from a lodger to be used but your partner wouldn't be a lodger so that's out also.

The IVA is going to cause you a pretty major issue now obviously and depending on the level of deposit will still cause you an issue in 3 years if lender criteria is the same as it is now. It may change however.

Sorry I can't be more positive but better that you know the position

Thrugelmir

Paying down your existing mortgage as quickly as you can , as will also allow you to buy that elusive forever house. Sometimes waiting is no bad thing. Debt costs money. Increasing your existing equity will bridge the gap inch by inch.

Doglover

Hi, thank you both for your replies. We'll keep on saving for now and review things in a few years.

Out of interest, if lending criteria is similiar in 3 years time, based on the above, what is a resonable and realistic LTV to aim for? Is 75% going to be optimistic? I appreciate the more money we can save the better but some sort of goal will help the motivation for another 3 years!

Thanks

Thrugelmir

Doglover wrote: »

Hi, thank you both for your replies. We'll keep on saving for now and review things in a few years.

Out of interest, if lending criteria is similiar in 3 years time, based on the above, what is a resonable and realistic LTV to aim for? Is 75% going to be optimistic? I appreciate the more money we can save the better but some sort of goal will help the motivation for another 3 years!

Thanks

I would set targets for reducing my mortgage, finding ways of saving money to get to my target quicker. Rather than focusing on LTV.

Mortgage repayments primarily consist of interest in the early years so speeding up repayment increases equity, as interest charged falls.

Doglover

That certainly seems more sensible - thanks for pointing it out to me. I guess lowering the current mortgage is saving whilst reducing the interest payments.

I drop onto the SVR of C & G as of 1st July and given my affordability to over pay presumably you'd suggest sticking with that for a while and hammering the mortgage debt down as much as poss whilst the interest is lower?

dimbo61

sounds a good plan but if you can build up an emergency fund of 3/6 months of income in cash ISA,s which should pay more than the C&G SVR ( is it 2.5%?).
Its always nice to have a few £K in the bank if the car breaksdown, new boiler needed,ETC

Doglover

It is 2.5% - for now anyway! I'll keep an eye on it and only fix when it starts jumping up. Hopefully I'll get a good year or so on lower rates.

I'll keep the current savings tucked away and start the over payments as soon as I am out of the fix (just finishing off clearing a credit card which will be gone just as the fix finishes).

Thank you all for your help and comments

knithryn

For a variety of reasons we are in a sort-of similar position but without the IVA.
If you have some savings, what about looking at an offset mortgage to reduce your interest payments at the moment? This has been suggested to us and we are going to look into it. The savings would be more significant than the interest we'd get from an ISA etc I believe...so worth looking into.
I think we will aim to become as close to mortgage free as poss on this house within the next 2 years, then use it as equity or sell it to move on.