I've completely messed up my chances of buying a house, any advice appreichiated!

jellyjelly84

Hello, I am a long time lurker on these boards, it sees like a friendly place so I thought I'd ask for some advice, My boyfried and I want to buy a house, we've got a 25.5% deposit (I inherited a large sum of money) and we've found THE house! Here lies the problem, I earn a good salary but my credit rating is shot, 633 to be exact - basically when I was younger I wasn't very good with money, I lived way beyond my means, and got myself into quite a bit of debt when I was in Uni, and although Ive worked hard to get myself sorted, the 3 accounts that I defaulted are still, and will stay on my Credit rating for 4 more years.

Then my boyfriend (who has a pristine credit rating) was made redundant in March and I have been supporting us ever since, he does work, but it's for his parents' business and he earns £500 a month, which doesn't even cover rent.

Then to top it all off, I have recently defaulted on another account, which we be on my credit report for another 6 years...I know, I know, I have only got myself to blame, but at the time, I was trying to pay everything off as quickly as I could and support us financially and I just couldn't do everything, I could kick myself for being so stupid.

Anyway, I am in a much better place now, I am debt free, I have now paid off every account, no credit cards, overdrafts, catalougues, nothing, and I won't be getting myself into debt like that EVER again, and ironically, I am actually now in a position where I can comfortably afford a house.

I explained all of this to a financial advisor who told me that although I earn a good salary, my credit rating is holding me back, and my boyfriend, who doesn't earn enough has a brilliant credit rating, his salary is holding him back; and for that reason no lenders will touch us, actually he told me, the main reason we can't get a mortgage is because of me, and that nobody will consider me for at least 2 years! I am devastated! 2 years!!!

Is there anything I can do? Anyone been n a similar situation? Any advice will be appreichiated! I can't keep renting for 2 years.

Thank You!

G_M

There's no silver bullet solution I'm afraid.

1) Improve your credit rating
2) See various Independant Mortgage Brokers, be upfront, and see if they know a lender who (for a price ie higher loan interest rate!) will lend to you.

Credit Rating

How it works and how to improve it

jellyjelly84

Any adice how I can improve my credit rating? Everything is paid off now, so is it a case of just waiting, I spoke to a broker who deals with people with bad credit, one company (kingsley or kingston or somthing) would only offer me a mortgage if the house was more that £90k (it isn't) and another would only offer us a mortgage if we put down £30k, with an interst only mortgage of 8%...humph, we can afford the £30k, but then we wouldn't have any money to do the house up...

satchmeister

Sadly you are three years too late as Northern Crock would have given you a 125% IO mortgage at 5x your salary. The banks are now operating differently and will not a) lend if there is any perceived risk or b) provide savers with any income. Their balance sheets needs to be re-built and bonuses need to be paid. This is what happened when the Labour government allowed reckless lending, now the pendulum has had to swing the other way. Those that 'benefited' three years ago are now sitting pretty with SMI and low mortgage rates.

edit to add, the one positive is that the general trend shows house prices falling and I expect this trend to continue for the next two years.

westlondonbuyer

Given your past problems with handling money, you really ought to say clear of distress lenders charging inflated rates of interest.

Of course you can rent for two years - I don't want to sound unsympathetic, but your unwillingness to do so smacks of financial immaturity and a reluctance to defer gratification, probably the very characteristics that got you into debt.

Spend some time learning to live within your means (this site is a brilliant place to start) and try to get into the habit of saving; however large your inheritance, it will slip through your fingers if you don't learn some financial discipline.

mlz1413

you have a 25% deposit saved which is the minimum you will need currently to get a decent rate mortgage if you had a good credit rating.

you are being quoted 8% when the base rate is currently 0.5% - what will that become when interest rates go up? 12% or 15% or higher?

renting for 2 years is probably the best thing you can do and yes you can rent for 2 years, if you can't continue to rent the place you are in or don't wish to continue renting the place you are in then you need to move.

Back in the 60's potential mortgagee's had to save the monthly mortgage payments for 12 consecutive months before a bank would lend them the required mortgage.

Maybe you could set yourself this target which will put you into a very good position to go and chat to mortgage advisors again next xmas.

As for THE house, you're not living in it and therefore don't know it's faults, so let the pipe dream be exactely that and look again when you can afford to buy it.

jellyjelly84

Of course you can rent for two years - I don't want to sound unsympathetic, but your unwillingness to do so smacks of financial immaturity and a reluctance to defer gratification, probably the very characteristics that got you into debt.

Yes I have been financially immature in the past, but I find it that incredibly insulting to be told that I am financially immature. I am sorry if I am being defensive, but I think that having worked hard to support 2 adults and pay off all of my debts, that I have proven myself to be financially mature. I have taken responsibility for my finances and sorted myself out. I am the first to say that I have lived way beynd my means, and not wanting to rent for another 2 years is not a reluctance to defer gratification, but I pay £550 PCM to live in a flat, where as a mortgage on the house we would love to buy would cost me £280, why should I pay someone else's mortgae when I could be paying my own and putting the difference aside for a rainy day?

I realise that my past mistakes won't allow me to achieve this for another 2 years, but I am frustrated with myself, and I cannot rent for another 2 years, when having saved and paid off my debts I know that I am essentially wasting £550 a month on nothing.

jellyjelly84

MLZ1314 - thank you, I really appreichiate your reply, it's sort of put things into perspective, we will save and try again next year.

poppysarah

Why not just keep saving. Encourage your OH and support him through this period of unemployment.

Buying a house now is not the be-all- of life.

anotherginger

jellyjelly84 wrote: »

I know that I am essentially wasting £550 a month on nothing.

it's hardly being wasted. you are going to be paying for somewhere to live. i think you need to ditch the attitude about renting as it seems to be holding you back and making you think you need to buy right now when it may not be in your best interests.

mustrum_ridcully

jellyjelly84 wrote: »

Any adice how I can improve my credit rating? Everything is paid off now, so is it a case of just waiting, I spoke to a broker who deals with people with bad credit, one company (kingsley or kingston or somthing) would only offer me a mortgage if the house was more that £90k (it isn't) and another would only offer us a mortgage if we put down £30k, with an interst only mortgage of 8%...humph, we can afford the £30k, but then we wouldn't have any money to do the house up...

Interest Only - what would be your repayment vehicle? You are aware I take it that with an IO mortgage you have to pay back the principal balance, in other words the ££k that you borrowed.

For a 25 year mortgage with monthly payments of £280 (based on 8%) you'll pay £84000 in interest and will still owe the bank the £40000 (or what ever it is) you've borrowed.

Whereas if you delayed your gratification, waited 2 years till your credit rating improved and managed to a get a repayment mortgage @6% for 25 years you'd pay around £80,000 in interest and capital payments.

What choice would a financially mature person make?

Go here and do the sums http://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator

As for £550 being money for nothing, for that money you get a roof over your head and also you don't have to pay for any of the following: CH boiler breakdowns, replacing the CH boiler, plumbing problems, leaking roof because tiles have come off, electrical problems, damp problems, plumbing problems etc etc etc.