Bad debt/good income -want mortgage!

t1mwatson

hi - we are unmarried couple with young child. We are in the process of looking for a house after renting for the past 3 years.

Our situation is that we have about 50k worth of credit card/loans outstanding. Our joint income is around the 65k-70k mark. Ive checked my credit score and there are a few 1's over the past 12months but nothing drastic. After after tax monthly income is around 3500 -4000 pounds. (My partner is a beautician who earns approx 400permonth pt) Outgoings around 1700 including rent.

We have seen a house for 107,000. We've been to see a mortgage advisor who has suggested that we take out a 125% mortgage with Northern Rock - this will allow us to consolodate half of our debt. leaving around 23,000 which we'll prob consolodate into a loan (enabling us to cut up the cards!)

Just wanted to poll opinion on this and ask a couple of questions; we have an 'agreement in principal' from Northern Rock and wanted to understand what this is. Does it constitute an offer? have they gone through credit-checks to allow them to issue this? what are the next steps for us - what will we need to provide to NOrthern Rock in order to progess this?

any help will be much appreciated.

GunJack

IF you choose to go down this route, I'd be VERY careful. May be better to go for 100% and then hammer your other debts down as fast as possible, then start overpaying on the mortgage to get it to less than 100% LTV. Should be achieveable in 5 yrs given your income, so if you can get a reasonable 5 yr fixed rate at 100% it would work.

If you go down the 125% route you need to be even more sure you're going to stay in the property until such a time that you have positive equity in the place. Same rules apply as above, hammer down the remaining debt until paid off then hammer the overpayments on the mortgage until positive equity is achieved, then look at a better mortgage.

Hope this helps.

t1mwatson

thanks for the tips gunjack