Applying for a mortgage but with debt...

tonimalony

Hi all

Dont know if this will either be possible but after being careless with money for ages I have ended up with a loan of £800 a couple of credit cards and an overdraft (totalling about £7k with the loan included). I am applying for a mortgage with my boyfriend who earns a lot more than me (combined income of about £100k) and he has a very good credit score. however, he owns another property also and mortgage on there is about 250k. So first question is do u think we will be accepted or will my debt just be an instant rejection? (although there is debt I always make large payments and havent missed payments). If I try really hard I could probably clear a lot of the debt over the next few months - what should I look to pay off first though, not in terms of what is cheaper for me to pay off first but what will banks be less weary of - credit card debt? over draft? loan? I wont be able to clear it all but probably half, maybe more.

Thanks

RedSoleShoes

Mortgage lenders are less worried about credit card debt than other loans. If you can pay it off first that will of course be better for you (in terms of how much you can borrow).

Debt is only a problem (when it comes to mortgage lending) in terms of it being offset against how much you want to borrow, or if you are in arrears or missed payments.

tonimalony

thanks for the reply. So, if I can, I should repay the loan first and then the credit cards? I should be able to pay the loan off in full next month, will that help things? I will have to make smaller payments than usual to the credit cards...

What are your general opinions of whether we will be accepted or not? Will my bad debt wipe out his good credit? We have a 25% deposit and looking to borrow about £150k...

getmore4less

Is the other place rented out?

25% deposit is £50k

unless there is a 75% LTV deal you want/need then if you went for 80% that would get the debts paid off.

depends on what rates you are paying on your debts and what mortgage rate you can get.

tonimalony

we have to have 75% LTV to get the rate we want. Also dont want boyfriend to essentially pay off my debts as the majority of deposit is from him! Not very fair... Other flat isnt rented out, he uses it as a crash pad in the city as works away from home alot and late nights etc. So he is liable for all of that 250k mortgage. I have just done an experian credit check on myself and it came out as 722 - JUST into the 'fair' category. With the combined credit score do you think this would be okay? By next pay check it may even be better... Also for some reason it didnt think I was on the electoral role for some reason even though I am which I know can affect credit scores...

surreybased

Hi,

Getting a mortgage will depend upon having a good credit rating and affordability. It seems that whilst you have debts you haven't impacted your credit rating (i.e no defaults, regular payements). You should just
double check the electoral register however as that could be important.

The other area is affordability - this is where your income and outgoings are important. Essentially you want to borrow £400k (from both mortgages) and banks will look at what disposable income you have available. When we applied for a mortgage the banks used repayments based on 6% interest rate (irrespective of the rate that we are actually on). They will also calculate what costs they believe a couple will have and use their figures rather than your actuals.

ALP2010

might be a good idea to get a broker on the case. i was in a similar position with the missus (ie am main earner & good credit rating, she has some debt & average credit rating). We went for the creme de la creme mortgage offering the best rights but surprise surprise they only want the 'best' customers so we had to drop my wife from the application as they didn't pass her and it's all gone in my name.
So what am I trying to say!? Get some expert advice on which lenders are happier to take people in your situation as you don't want to waste your time with stricter ones.

sims22

I was in a similar situation where I had outstanding debt and my husband was the main earner/no debt. As said above, it comes down to affordability. The debt itself will not be a barrier to getting a mortgage but the lender will look at whether you can afford to keep up those repayments as well as the mortgage.

We initially applied for a 90% deal with RBS last May and that was turned down. We increased our deposit to 15% with my family's help and managed to get a mortgage with Woolwich. My credit score was also "fair" at the time as I'd been late on a couple of card payments but never missed any.