First time buyer with debt issues

Leopardlady

My partner and i would like to buy our first house, but the area we need to live in is expensive and i have debt!

I owe approximately £19,000, my partner owes about £2,000.

We are looking at a 100% mortgage as we can not get a deposit at this time. We would be looking at buying a property that is approx £180,000:eek:

I have been advised by an independent advisor that we could get a mortgage up to £190,000 without a problem.

Any advice on whether it is a good idea to buy now or to continue and try and get rid of my debt first and then buy a house, or do we buy a house and consolidate my debt into the mortgage?

Thanks.:eek:

BarmyBubba

Depends what the debt is I suppose. If some are credit cards I would personally try pay them off before getting a mortgage.

Suppose it comes down to your personal situation. How urgent are you for a house and can you afford mortgage repayments for £180,000 plus your other monthly committments (credit cards, loans, etc) as well as of course the other monthly bills that will come owning a house.

Might be best to work out a budget to decide what you can afford to pay out each month.

Bargain_Rzl

This is a personal view and is NOT financial advice ... Get rid of the debt first! ... The market is uncertain at the moment ... I would think it very unwise for anybody, even a debt-free person, to take out a 100% mortgage when there's a good chance prices may fall, and an even worse idea to end up with a 110% mortgage (which is what you'd have if you consolidated - that's IF a lender would agree to you doing that) ... Have a look on the Debt Free Wannabe board for some ideas about clearing your debt, throw all your spare cash at it for a couple of years, and then look at buying again. I just think it's way too much of a risk to approach it any other way - a repossession waiting to happen. I hope this isn't too harsh, it isn't meant to be.

seraphina

We are looking to clear all our debts before getting onto the property ladder - I think any other approach is foolish.

If you consolidate your debts onto a mortgage (assuming you can get a 100+ % mortgage) you will pay more in the long term. 10% over 5 years is cheaper than 5% over 10 years and all that.

What are you going to do when your boiler packs up? If you're already in debt, it doesn't sound like you'll be able to put money aside for savings for contingencies. And if you're anything like me, you'll get carried away with redecorating or whatever, and it will probably all wind up on the never-never...

Recipe for disaster if you ask me - don't be cowed by everyone else jumping onto the property ladder. This is what gets me- I'm insanely envious of people who own their own houses. But you have to realise that jumping onto the property ladder before the numbers make sense will most likely lead to you falling straight off it again.

CB1979_2

if it were me, i'd try and buy now, what's the point in lowering your debt, but then you'll be missing out on the house price rising, as well (i'm assuming) wasting money on rent.

how does your partner feel though, about having £19k of YOUR in a JOINT mortgage?

cupid_s

One problem as i see it is:
You have no deposit, you have 21k debt between you. So how could you afford the repayments on a 190k mortgage?
It's not always about what you can get off the bank - and remeber that any debt you have will be deducted from what they will give you. My husband was offered 7 times his annual salary and there's no way we'd be able to afford to repay that.
If you can afford a 190k mortgage (which wouldn't even cover your debt anyway) then you can afford to save for a while and pay the debt off.

This will give you a clearer idea of what you actually can afford when it comes to buying a house.

martyn4764

CB1979 wrote:

what's the point in lowering your debt

Apart from anything else, interest rates are on an upward curve, so debt will become more expensive to service unless repayment rate is fixed.

CB1979 wrote:

you'll be missing out on the house price rising

You recommend buying at the top of an already inflated market, then? With a 100% mortgage? And existing debt? And mortgage rates on the rise? Blimey...

CB1979_2

imo yes, don't see the point in keep putting off getting on the ladder, obviously get a fixed rate mortgage, and if you can AFFORD the monthly repayments and obviously other costs (which you should be if already paying rent + bills).

what's the point if in 12 months time, they will still owe £20k between them and house prices have gone up £10k?

so if you can do the sums, and it all works out, then why not? what's the point in continuosly paying £1k a month in rent, when that would cover your mortgage? obviously assumptions on the figures.

cupid_s

firstly there's no mention of how much rent they're paying. To be honest there aren't many regions where you will pay the same in rent and mortgage if you have no deposit. We are paying less in mortgage than rent would be but we put down 30% deposit. With a 100% mortgage then we'd be no better off buying. And house prices are slowing down. In Leeds house prices have decreased by about 5% over the past 3 months.
Also 1k per month would probably not cover 190k mortgage, especially as 100% or more mortgages have much higher rates in general. And as well as this buying a house for 180 and wanting to pay off debts would mean needing a mortgage for over 200k.

Bargain_Rzl

The other point which has not been addressed is why the OP is in £19k worth of debt to begin with. OK, there could be a one-off reason (old student debt, loss of income due to now-resolved medical problems, failed business in the past, etc) but if it's a result of a general imbalance of income vs. expenditure, what's to say the debt won't get racked up again IN ADDITION TO the consolidation of £19k onto the mortgage? That could really leave the OP in a perilous position. Leopardlady, I'm certainly not making any assumptions about your circumstances, but as you haven't hinted at why you're in debt to begin with, I may as well point this out in case it does apply to you.

purplegrape

Interesting question - my father is all but beating me over the head with an estates agents board to 'get on the ladder' with well meant 'advice' about mortgages and doing up properties etc etc (Where I'll get the cash for new kitchens, boilers, bathroom, etc etc I think he may have missed in his head :rolleyes: )

Personally, I'd rather work off the last of my debt and buy when I'm more financially secure rather than stick my neck on the line for a huge financial commitment now, which would means some smaller debts will get neglected and added too with the costs involved with buying and moving etc. I'd rather get the rest of my house in order, so to speak. But I have a signifcantly smaller debt than yourselves.

I guess I can only make that decision because I know my own financial situation and how much getting rid of the debt means to me in terms of freedom overall. If you've got no chance of paying off the debts within a couple of years I can see why buying now would be appealing. Good luck!