Advice on mortgage and credit rating

roje

We are currently overcrowded in our current house (quite seriously). We've had a mortgage with Santander for 12 years now and have been consistently good customers. We have around £60k equity in our property. Our income is £35.5k, only one of us works (me) but we are both graduates (not sure if this makes any difference anymore). I have a good credit rating.
My husband has a fairly poor credit rating thanks to a default, which was not his fault but no satisfactory conclusion was reached. It was only for £60, which was paid shortly after receiving the default. We've tried to get the default removed but had no luck.
We need to apply for a larger mortgage and were thinking of applying with the same lender but we're unsure what our options would be. Our current mortgage is in both names, but can I apply in my name only? Would that improve our chances? I am able to afford the repayments alone as I am the sole earner in a stable job. Would it make a difference, or will my husband's credit rating still drag mine into the gutter anyway when applying for a mortgage?

Someone working in the finance industry also told me that small settled defaults (less than £100) are not normally considered disastrous in terms of mortgage applications, is this still true?

I'm almost too afraid to ask the bank the question, if we can't get a larger mortgage and we risk remaining this overcrowded until the default drops from my husband's credit history, we'd be waiting for another 4.5 years and it's just not feasible. We'd have to waste our money renting a property instead which seems ridiculous when we are more than able to make the repayments on a mortgage.

Any help would be very gratefully received.

kingstreet

If you have joint accounts with your husband, you'll be associated so a sole application probably won't work. It is a piffling default and you might still pass with a high street lender.

On £35k, you'll more the likely be able to borrow around £100k (allowing for dependents) and your £60k equity should mean a deposit of around £50k after fees?

In which case, a mortgage of £100k on a £150k purchase price, or around 66% loan to value, shouldn't be too difficult.

I'd try for an agreement in principle with your current lender or see an independent or whole market broker for more options, and possibly better rates.

roje

Thankyou for your reply, very useful.

I should have pointed out that the £60k is after fees, our house is worth around £105k and we have an outstanding mortgage of £32k so on paper we have £73k equity. Assuming we got £98k for the house (I'm not sure we could accept less) I think we'd have (up to) approx £60k after fees to use a deposit. The cheapest houses we can find of a suitable size are on the market for £180k. If we could only borrow £100k, it doesn't sound very feasible unless we could persuade a seller to sell up for £160k which I suppose is pretty unlikely. I think we'd need a mortgage of at least £110k to make it work. I thought I'd be able to borrow more than £100k- seems I was wrong

Thrugelmir

Why are you "overcrowded"? If you have dependants this will impact affordability. The fact that your husband doesn't work will reduce the amount that a lender will advance.

If you can afford a larger mortgage and property. Then it should be possible for you to overpay pay your mortgage or increase your savings. Which would at least get you closer to your objective.

roje

We're overcrowded because we have 5 children. My husband doesn't work because the childcare costs would render it pointless until the youngest child begins school and I have more earning power. I don't think him working would make much difference to a mortgage application in the current situation because our outgoings would be so much higher anyway.

We can definitely afford to overpay the mortgage, but the difficulty is that we are so overcrowded that if we cannot secure a larger mortgage, we will need to either take a loan or remortgage to extend this property or sell/rent this property out and rent a larger property. Rental will be more expensive than a mortgage for no return, which is the irony here. We know we are able to pass the necessary checks to rent a house as we applied last year and and were accepted, but a family bereavement led to us remaining here. I think the criteria in terms of credit rating for rental must be less stringent?

Extending the current house would add some value, but would also be tying us into this situation long term as we'd still have less equity. It does feel rather like a Catch 22 at present.