How to make it happen?!

stevus_uk

I'm after some advice about how to make a mortgage happen for me and my family. Some background is in here, so apologies for the length of this (if it goes on too long).

About 4 years ago we sold our house, leaving with no profit from the sale after paying debts that had amounted as a result of long-term unemployment. During the accumulation of debt we damaged our credit scoring, some of which we managed to clear through writing to the companies and some we did not, so our credit rating is probably slightly lower than average.

Saying that, however, we have since managed to rent property (and have been renting for the last 4 years) which followed appropriate credit checks, and we've also have taken out 2 loans - the first to pay off remaining debts, the second to pay off and improve the first deal we had which we took out about 2-3 months ago so our credit can't be horribly bad.

We also had dealings with the Co-Operative Bank through a government run scheme about 2 years ago who declined us at the time as they said the mortgage was too high, despite being assured that we would have an opportunity to "negotiate" the amount when an offer was made: this was all shortly before the whole scheme was closed.

We have a small deposit of around £10K and want to try to restart by buying a property rather than renting. I'm 40 in case that's relevant. Does anyone have any advice about best deals around that offer 95% LTV mortgages (if any)? The only one I've found is through Lloyds but the deal requires a guarantor of sorts who has 20% of the property value in savings...which unfortunately we do not have.

Any help or advice would be great. Many thanks for the time you take to respond - it is vey much appreciated!!

thriftychap_2

Very sorry but you will need a bigger deposit. Unless you are happy to buy a new build with a developer assistance scheme.

DVardysShadow

If you accept that you are going to take some time to build up a sufficient deposit, you really should put your savings to paying off your debts. Debts are generally counted against you for a mortgage. So the only benefit you are getting from having the savings is the vanity of saying you have savings with a tiny interest rate, for which you are paying a hefty interest rate on your debts - thus slowing down the rate at which you are really saving. And you have not paid off any debt whatsoever by taking out loans - you have merely moved the debt.

What I have said here may appear a trifle rough. But your financial misconceptions are standing in the way of what you are trying to do.

stevus_uk

Many thanks for both your responses. I do appreciate you taking the time and for the honesty.

Having some "savings" which is accumulating minimal interest when compared against paying higher interest on debts doesn't make sense, I agree, however, the "savings" were part of a windfall and not something we have accumulated ourselves - we have no spare financial capacity to save at the moment due to paying off what we still owe hence the question about what we could do. If we did pay off what we owe then we are left having to try to save a deposit, which, to raise a similar amount, would realistically take 4-5+ years to achieve from scratch. And, in the back of my mind is a thought that time is running out to restart as I'm already 40 with only 27 or so years of working life left.

beecher2

Go onto the Debt Free Wannabee forums and you'll get help in saving up a deposit from scratch. Any lender would weigh up your debts and against your deposit and if you have no spare capacity to save, then how will you cope with a mortgage and maintenance costs?

DVardysShadow

stevus_uk wrote: »

Many thanks for both your responses. I do appreciate you taking the time and for the honesty.

Having some "savings" which is accumulating minimal interest when compared against paying higher interest on debts doesn't make sense, I agree, however, the "savings" were part of a windfall and not something we have accumulated ourselves - we have no spare financial capacity to save at the moment due to paying off what we still owe hence the question about what we could do. If we did pay off what we owe then we are left having to try to save a deposit, which, to raise a similar amount, would realistically take 4-5+ years to achieve from scratch. And, in the back of my mind is a thought that time is running out to restart as I'm already 40 with only 27 or so years of working life left.

Windfall or not, the answer is the same, pay down your debt. Think of the amount you would be saving if you did not have to pay off debt. There are no real shortcuts in this. If you are renting, and you have debt, then your net worth is zero or negative. So lenders will not see you as a good prospect.

As you point out, you are 40, so you really need to get underway with this.

getmore4less

We have a small deposit of around £10K and want to try to restart by buying a property rather than renting. I'm 40 in case that's relevant. Does anyone have any advice about best deals around that offer 95% LTV mortgages

we have no spare financial capacity to save at the moment due to paying off what we still owe hence the question about what we could do.

If you are thinking £200k with £10k(5%) deposit think again.

No other savings or capacity to save, £5kish goes in fees leaving £5k for a deposit and a £100k house on 95%.

The other issue is you will still have the debt to pay so any hickup with income and you are back where you started.

I think you need to have a full review of your finances, getting into debt during the period of unemployment is a sign you were not well prepared for it, you need to be prepared in case it happens again.

Conrad

Steve I'm afraid the only answer is to mirror the behaviour of an old fashioned Wuaker type person.

1) Pay off all debt
2) Don't waste money - those little lunches and snacks each day all add up - better to take a packed lunch
3) Live in cheapest rental property

To be honest my gut feel is you might have a happier life in council accomodation just as millions did in the past - especially one of those in a nice rural location so you don't end up on a big estate. In Germany fewer people own, instead thye live in rented or social housing and then just save up for retirment. Saving is the key to deep hapiness whereas spending on things that one day all end up in a dump is not a route to happiness.

anh1904

I would argue with Conrad that Saving is the key to deep happiness, however, the fact that you say you haven't actually saved anything and that it was a windfall should start the alarm bells ringing.

Why are you in such a rush to own/buy? House prices are falling, and in many opinions likely to continue to fall, so why buy a depreciating asset when you will pay the highest rates due to a very small deposit.

Plus there are all the costs associated with buying and moving, which for someone with no spare income capacity sounds like a dangerous call.