First time buying - not a clue!

CatchFazed

Hi all,

Looking for a little unbiased advice!

I have around £12k of debts (credit cards and a loan), and while I haven't defaulted, I tend to pay off a chunk then spend it again at the end of the month (I know, I know). I've just really sorted out my budget and started chipping away at the debt, and have worked out that if I throw everything at it I can be clear by the middle of 2013.

Me and my partner have been talking about getting a house for a while now - he's self-employed, with declared income of around £10k a year for the last five years or so.

My income is around £30k a year, including my bonus.

Now, my partners parents have offered to help us out with a deposit of up to £50k. My partner also has savings of around £7k.

I'm keen to spend the next two years paying off my debts and then cancelling my cards, to show I haven't got access to excessive credit. My partner thinks we should apply now.

What are my chances of getting offered anything like a decent mortgage? My gut is telling me to wait, but he's pushing for us to apply and at least see what we can get.

What do you think? Any opinions appreciated.

jonny_power

could you not use the deposit money to pay off your debts, have a clear run of credit for 6 months and then apply?

Yorkie1

Any lender will look at the amount of debt you have and will immediately wonder whether you are a good credit risk. The debt will impact on the amount you will be able to borrow, and I suspect that you will not have access to the better rates / mortgage products available either. There is also the fact that if you haven't shown you can live within your current means, you may well fail the affordability test which the lender will do (impact of rises in interest rates).

I really don't think your partner's idea is a good one.

jonny_power

Just to add, we struggled to get a mortgage (albeit at 90% LTV) with a better joint income and no debt/good credit histories. It isn't easy right now.

sonastin

I think you're right to wait. You need to be ready before you commit yourself to such a big purchase. If you haven't got complete control of your finances, you aren't ready yet. If your partner is really desperate to own, your partner could take the deposit and buy on his own. Except that his income isn't enough to get any sort of useful mortgage. Beware of him pushing you into it just because he needs your income to qualify.

devotee

Actually it's not impossible, but you need to speak to a broker. If you're buying something in the region of 150, you'll be fine as you'll have a decent deposit. The broker will work on income multiples and affordability. The banks just tend to deduct the loan and cc's from the amount they can lend, and as your credit is fine (you are paying bills on time and not defaulting) and your partner has 5 years accounts that's enough. In theory you can probably borrow about £170k.

CatchFazed

Hi guys,

Thanks for all your advice - it's really appreciated. I think I'm going to wait at least a year, throw as much money at my debts as I can, then potentially start applying for mortgages towards the end of 2012. Hopefully I'll feel more settled and comfortable by then that I can live within my means, and my partner can continue to save so we'll have an even bigger deposit to put towards the house.

Thank you all.

dodger1

Op to stop the credit card spiral just cut them up. I used to be like you, it was too easy so I cut mine up but didn't cancel them. That way it looks better on a credit check, you've got cards but aren't abusing them.

jonny_power

dodger1 wrote: »

Op to stop the credit card spiral just cut them up. I used to be like you, it was too easy so I cut mine up but didn't cancel them. That way it looks better on a credit check, you've got cards but aren't abusing them.

definitely recommend cutting the credit cards up. I had a student overdraft of about 1500 which i didn't pay off for about 3 years, i would chip away at it then use it back up, even when it started to accrue interest. The bank then gave me 2 months to pay it all off and I did it pretty easily, you just need to remove the temptation to spend it again!!

CatchFazed

Cheers guys - cards got the scissor treatment tonight. All for the best, though!

Going to speak to my partner tonight about using his £7k to pay off the bulk of my debt, leaving one card open (£3K) to show ability to get credit (but keep the card snipped) and then apply early next year.

warriorfullights

I see myself in you. lol

Anyway, me and my hubby have the same experience. We've been paying our credit card every month and every time the balance gets back, we can't help ourselves but to use it. We always say that we are just treating ourselves since we are working so hard. But anyway, what we did was we take risk. We started paying for a house. Since it is a new responsibility that needs to put our best focus on, we've been forced to skip spending eversince.