Mortgage Arrears and Credit Rating

super_g

My partner recently lost her job and although she had another job lined up she broke her foot on holiday! So has been off sick for 6 months now. We have depleted a lot of our savings to keep up to date with all bills and credit agreements. I am now feeling the pain.

I had to put my mortgage into arrears for a 2nd month now. Which means I owe them £800 in total (£400 for each month). The mortgage advisor informed me that my credit rating had now been affected for 6 years. She said that I would not get a mortgage anywhere else even if I was lucky. However, my current mortgage provider would offer me a mortgage.

The agreement was a 2 year fixed term @ 4.8% - it ends in August 2011 but is pre-approved in June 2011.

My concerns are:

1. Would I be penalised with an unfavourable rate come renewal time because of these 2 months of arrears? She said that I would not be if I cleared the arrears by the end of the agreement. I have some doubts in my mind that if no one else would consider me for a mortgage for 6 years then why would my current provider (NatWest) rescue me with a good rate?

2. As my credit rating has been shaken up for 6 years now. Would this affect my hire purchase? I have a VW on a hire purchase plan as part of the solutions scheme, the scheme entitles me to 3 options:
- Hand the keys in and walk away at anypoint without owing a penny
- Make a baloon payment at the end of the 46 month term and own the car out right
- Thirdly my chosen option: part exchange the car for its market value at any time and enter a new agreement

I have nearly reached the end of my mileage allowance / agreement as it has been 38 months now and I would be looking to part exchange in the third quarter of 2011.
Would a future hire purchase be affected because the mortgage arrears have dented my credit profile? I have always kept on top of all the hire purchase payments.

The only other debts we have our:
- Laptop on credit; never missed a payment
- Sofas on credit; again never missed a payment


Credit Rating is showing as maxed out because I have a lot of agreements in my name: laptop, sofa, mobile, car and mortgage - all under my name only and no joint agreements.

Thank you to anyone who takes the time out and advises me in this time of need. I don't wish it upon anyone! God bless.

beecher2

Your present lender won't look at your credit history before offering you a new deal but you'll need to clear your arrears.

I don't know anything about the solutions scheme so someone else will no doubt help there.

Sounds like you need to get your spending under control and stop buying things on credit. Go onto Debt Free Wannabee forums for help in budgeting. Is your wife going back to work soon - 6 months sounds like a long time off for a broken foot.

super_g

We can clear the arrears by February 2011. I have differed January's payment but can make 3 payments in February 2011 as a trust fund will be unlocked early February - don't know the details but it is money that my mum saved up over 12 years or something and she wants to split it 3 ways between me and my siblings.

Six months was a long time because it started playing up. The metal frame was placed to support the ankle but it started flaring up and a second operation was required.

She has interviews this month and hopefully will be in work by next month.

All I want is to get a favourable rate on my mortgage - if credit history is not considered then would arrears be?
and do not know if the mortgage arrears have rocked my credit profile so much that I will be refused another hire purchase.

ps. we planned to have everything paid off but the foot happened! Next time I will plan ahead and budget so I know I can make payments if something happens. Learnt my lesson the hard way. Despite the agreements I am very good at budgeting. The advisor at the bank was impressed too but just that the combined income is not enough at the moment. A family emergency also meant we chipped into support my older sister so the savings took another chip and at the time I did not foresee my wife losing work.

Thank you for your reply.