buying the house I rent? Getting a mortgage

zaksmum73

Hi - after some advice/direction please.

3 yrs ago I sold my own property because I was pregnant and had to move for more space. I sold right at the worst time and made no money from the sale. I have been renting since. For the last year I have been renting a house which is perfect for the family. Our landlords said it would a long term rental but came round last night to say they want to sell it, by July next year.
I want to buy it and have hated being off the property ladder for the last 3 yrs.
I believe the house to be worth £150k. I have a deposit of £22.5k i.e. 15%.
However - I am worried about the application process. I am sole parent to 2 dependants, but earn good money £54,000 per year. I have built up £46k worth of debt though I have just cleared £15k (literally JUST cleared it, it's not updated on my credit report yet)

i have until June to get the sale sorted, though I want to crack on now.

Is it best for me to wait for the debt clearance to show up before applying? I presume yes.
Any advice on likelihood of getting a mortgage given my high levels of debt - no defaults ever by the way. Looking at my SOA, I now have £700 per month available after all my incomings and outgoings are accounted for, therefore repayments wont be an issue
Advice please, or words of wisdom?

Caroline73_2

I doubt the banks will lend you anything with such a high level of debt.

If you used your 22k of savings to pay off your debt and then saved like made for the next ten months you could pay it all off and probably save up 10% deposit.

holly_hobby

Although repayments from your perception may not be an issue, I feel that your high levels of borrowing i.e 31k AFTER your recent 15k reduction - is still v high, which will be further exasperated if the debt is "rolling debt" i.e credit/store cards, flexible loans (ie a debt you can repay, and built right up again without further application). Mge underwrites will look at this aspect, as well as general affordability as a whole - and will restrict lending according.

If this were me, I would seek to get my debts down a little more from the current 31k o/s. I would also (if you can) consider throwing in some of your rolling credit facilities (save 1 or 2 for emergencies) - to further assist your application.

Of course .. all the above is opinion (based on mge uw and sales experience), what you could do is apply to a chosen lender for an agreement in principle (prelimary agreement to lend based upon submitted info), and see what they come back with, with regards to your borrowing capacity (Halifax offer AIPs which won't affect your credit score if rejected/not taken up), then at least you will have a better idea where you stand financially & if you need to start disposing of cards accordingly.

If you don't want to approach Halilfax directly, you may wish to consider using the facilities of a whole of market broker, who will guide you through the application process, facilitate an AIP for you from the most attractive lender, and generally support you through the whole pch process.

Hope this helps & good luck (try and get those debts down asap !!)

Holly

kingstreet

What is important about your credit commitments is your conduct and the amount you are paying.

A mortgage lender will take the annualised cost of the credit off your income before calculating your borrowing power.

For example, using the Halifax affordabiity calculator and assuming the worst possible score, a C pass, you'd be able to borrow over £250k with no existing credit and no dependents.

http://www.halifax-intermediaries.co.uk/tools_and_calculators/mortgage_affordability_calculator/default.aspx

Allowing for monthly credit payments of £700, two children, no tax credits or child benefit and an 85% mortgage, Halifax will still lend you upto £196k.

As it is, with a mortgage of around £130k over 25 years, you should still be within affordability guidelines, paying around £840 per month if interest rates hit the more historically accurate 6%pa.

When you apply for a mortgage, you indicate which credit commitments will continue and which will be paid off, so there should be no difference between now and waiting for them to show as repaid on the CRA systems.

zaksmum73

thanks for the advice

I am working through the debt currently - making a concerted effort to get it down in any and all ways possible (credit card shuffle/budgeting/cost cutting/using savings/frugal living etc)
The £700per month I mentioned is money that can (and will) be used now to get some of this down. I think a WoM advisor is the way to go. In the meantime are you saying it's better for me to get my credit limits reduced on the cards I have with high limits? so lenders see I have less chance of running more debt up?

holly_hobby

Go for an AIP - and see what comes up.

Then if you need to re-arrange cards/credit limits you can accordingly - I would hate for you to lose access to credit if it doesn't actually affect the amount you want to borrow. (which may be sufficient even with your current debt levels).

Use the info Kings has kindly given to give you an idea ...

H