the future of 100% mortgages

mikeandrach_2

i know 100% mortgages have their pitfalls, and that they are part of the problem we are in now etc etc so please no need for an economics lesson.

basically, we are a young professional couple, renting at £600 per month, earning 25k and 23k. i must stress though, one big expense we have is the 25k income involves a commute of 140 miles per day, which means that i would consider taking a pay cut to anything of 20k plus that is close to home if somehting comes up.

again, we are not looking for on that income you should save etc. in common with others, we have debts to pay which will all be gone by next decemeber at very latest, cars etc.

so, realistically, we are looking to buy a house any time from then. ideally we want to spend 180k ish if buying now based on houses we like.

after debts are paid off, we could easily save £1000 pcm. but to get a 10% deposit that means a further 18 months.

our credit ratings are less than perfect, small defaults but no ccjs. however, we have never been a minute late on the rent, council tax, or a loan with welcome at £243 per month.

i know the future may change a lot from what we think now. but being realistic, a married couple aged now 26 and 24, with no debts at all although some adverse credit in the past, with little or no deposit, but no gaps in employment and no rent payment issues with excellent references, what chances do people think we will have of having a mortgage for any amount?

our financial errors have tought us to avoid them again, so its a lesson learned although a very harsh one, but will help us in the future without a doubt. we made the mistakes of both buying new cars on finance, although we are now so far into finance and cars have done so many miles there i sjust no point changing them, small credit cards debts, maybe £600 in total cross 3 cards so not huge, 1.5k with next which is up to date, we took out a personal loan with welcome for 5k at 243 per month to pay for wedding costs, but have never ever missed a payment and will start overpaying to save interest as soon as other debts paid off. although we owe money, which isnt great, we are in total control of making payments, have a couple of smaller loans where payments end in next month and 3 months, which will help a lot. a couple of smaller debts in past were passed to debt collection agencies, each one approx £400. we are on payment plans and have less than half to go, again with no missed payments.

any advice would be greatly recieved, i am dreading and fearing a few 'telling off' replies, but we are a young couple who own up to our errors, dont blame the banks or finance companies etc and just want to buy a house to get on with life and start a family. like i said, we know its all our fault and not the banks etc, and this willingness to be honest with ourselves is what will hopefully get us out of debt even more quickly and hopefully onto the mortgage ladder

property.advert

Forget 100% mortgages. First you need to stop credit and start saving. You chose to borrow money to get married. It might have been sensible to get the property first.

With a less than perfect credit rating, you will need to address that and the time it takes you to start saving will help. I suggest you get one of these monthly online things with the credit agency and monitor your position to get a feel for how it changes relative to what you are spending.

At the moment you are a terrible risk. You have no money, you have multiple debts, you have a history of spending more than you earn and you have failed to make good on your monthly repayments in the past. Computers done care about your work history or your good references, the numbers speak too loudly for them to be heard above the resounding voice shouting "do not lend !"

Don't worry, it will get better.

Just a question though, why on earth don't you move nearer to work ? Less petrol, less wear and tear on the car, perhaps sell one car, less insurance, more free time, no need to lose salary. It is madness to live so far away.

Thrugelmir

No one will tell you off and you mustn't take responses as judgemental. You will get straight on the chin advice.

Seems you are tackling your finances head on. So stick with it.

You really need to be aiming for a 10% deposit. In addition you will need to fund the purchase costs and allow a reserve for additional expenditure.

Aim to get on a foothold on the ladder. Your dreamhouse can follow later. So perhaps lower your expectations. At least once you are on the ladder part of your monthly outgoings will reduce your mortgage debt, as opposed to renting which is dead money.

If "you" are commuting 140 miles a day, I would question whether 5k is actually enough to cover the true cost. My reckoning is your are travelling somewhere in the region of 32K per annum. So very roughly you are costing this at about 10p a mile. Far too little. So maybe a radical rethink is in order. Maybe a sizable drop in salary seems painful but quality of life could be better.

property.advert

Thrugelmir wrote: »

..If "you" are commuting 140 miles a day, I would question whether 5k is actually enough to cover the true cost. My reckoning is your are travelling somewhere in the region of 32K per annum. So very roughly you are costing this at about 10p a mile. Far too little. So maybe a radical rethink is in order. Maybe a sizable drop in salary seems painful but quality of life could be better.

Good point but on such a low salary, when saving money is important, moving would seem more logical to me. They are renting so they have flexibility. As they have shown they cannot budget on their current income, I would be wary of them being able to cope on a reduced income.

A full SOA would undoubtedly throw up some areas for discussion / reduction.

opinions4u

what chances do people think we will have of having a mortgage for any amount?

With small or no deposit and a credit history that involves defaults and debt collection agencies? None whatsoever.

You need to keep the focus on:

- repaying all the debts
- not taking on new credit commitments
- letting time take care of the factual records about your payment history
- building up a deposit

The further in the past that your payment problems are, and the bigger the deposit you have, the better your chances of getting a mortgage.

the future of 100% mortgages

They may well make a return in the future. But I think it's a long way off. 95% mortgages are now available again, but I would hazard a guess that Yorkshire Bank are making those available to customers who have a squeaky clean credit history and aren't stretching themselves to the limits of affordability.

mikeandrach_2

thanks for your replies. moving closer to work isnt an option. we both work in opposite directions. rach on 22k but rising as she is a teacher, travels due east, i travel due west, so wherever along that line we live the mileage will be the same, its just a question of who does what miles.

also, my location can change at the drop of a hat. my last commute was 25 miles each way, and there is nothing to say that next week it wont be 20 or 30 miles again, although unlikely it is very possible.

i am looking at jobs closer to home, not leats because i dont enjoy my current one. if i dropped to say 22k, but wa sonly travelling 10 miles, i would actually be better off overall, so i am looking at this as sensibly as i can.

from a starting point of now, we are on top of all our monthly payments. nothing is now overdue although obviously balances remain. we will be debt free by next december at the latest, that is a relaistic timescale allowing for a few unexpected bills etc just incase, so may be even earlier.

so by that point, we will be at 18 months without late or missed payments. suppose we save for 12 months to 18 months and get say 18k in savings, 10% of the 180k we would like to be able to spend. again 180k is the most i owuld ever spend on a house, we could spend more in the future but whats the point, it dont make you live longer and the 70k difference up to 250k is somehting you could do a lot more with than buy a few more bricks.

so if we had steady incomes, 10% deposit, 3.5 years of excellent credit activity, would this make a big difference? or would the couple of years before that bring it down and mean we are still stuck?

getmore4less

Why are you moving around so much?

When this is not your normal place of work you should be able to claim expences, even if they don't pay there is the tax relief on use of own car.

Since you move about.
I would move close to rach place of work, close enough to not need a car

Then you stay over some nights when the distance is that far.
Can you adjust your hours find things to do that give you more free time at home.

170miles is £15-£20 just for fuel per day, probably another £2k-£3k per year in costs/depretiation another £50pw
That would pay for a room or a couple of cheap nights in a hotel and save a lot of travel time.

Dan_1976

Like standard mortgages, like credit cards, like car finances and personal loans if they are in the wrong hands or the person borrowing is not financial cute, they can be dangerous.

I think they have a place in the right market at the right time for the right people. Unsecured add ons etc should be banned though!

We all learn from our mistakes, you wont make them again!

opinions4u

Dan_1976 wrote: »

We all learn from our mistakes, you wont make them again!

One of the remarkable things about these pages is that far too many people repeat those mistakes over and over and then wonder why they can't get credit.

Dan_1976

This is very true, but even as a nation we have a short memory!

mikeandrach_2

i completely agree anything above 100% mortgages is absurd. no way on earth would we live close to where rach works, it is, how do i put this, almost 3rd world. tha part of the city (which shall remain unnamed) is one of the worst parts, and i genuinekly would fear for our sfaety as well as that of our property and car(s). at work her car has to be locked in a compound with 6ft razor wire fences.
it is my permanent place of work, in that there is no date where i am scheduled to leave, and i am on a permanent location. basically my last position closed, and i had the choice of 140 mile commute or redundancy. i chose to work my way out of this, rather than sit at home on my backside and complain the world is against me.

for various reasons, moving isnt a viable option, as i am looking to change emplyer anyway and where we live is central for 3 major cities and a handful of smaller towns, so it is the best place to be. our council tax is low, our doemstic bills are eaisly affordable and we like it here. i know the mega sensible thing is to move to a budget place but we are talking baout being out of debt in 18 months anyway, and for that 18 months we want some quality of life. we also have a very good relationship with our landlord, and wouldnt let him down.