Good Credit Rating + Bad Credit Rating = ?????

JoanneC_2

Hey Guys!
I have a really good credit rating but my boyfriend's is not so good (he had a three year Trust Deed (Scottish thing like an IVA I think) which has just been completed and discharged). We have our name down for a new build house and we would need to get a mortgage arranged for September but I would like to go and get a mortgage agreed in principle now just to make sure we can get one. My question is if we get a mortgage agreed in principle I presume that our credit files will then be linked and his score will bring down mine then when we do actually go and get the mortgage in september will we get offered a worse deal? Should I not bother getting a mortgage agreed in principle hence avoiding the credit linkage or will it not really make a difference? Sorry if that sounds confusing - I'm confused!!
Thanks in advance!!

jamesd

If you qualify for the mortgage on your own income doing it on your own is one option. If you so far have no joint bank accounts this could work without a financial link. If you already have any joint accounts, you probably already have a link.

If you don't qualify on your own income then you two will need a financial link because you'll have to make a joint application. A mortgage broker can sort out the best deals available but you shouldn't expect to pay more than 0.75% over the normal mortgage rate and the longest you'd have to do that is probably 6 years. Since the trust deed is discharged you may well jointly qualify for normal rates from some lenders.

Having a decent deposit - 5% to 10% - would help, so if you don't have one, now's the time to be really aggressive about making and saving money.

It's worth chatting with a mortgage broker now just so you don't end up being worried until the purchase happens. Get the two pound statutory credit checks for both of you from at least Experian and Equifax before you do this - the broker needs the information.

If you're told that you have to pay more than 0.75% over the high street rates, don't accept the offer before asking for opinions here.

Since the trust deed is discharged I expect you to be fine.

JoanneC_2

Thanks for the advice! We have no financial links yet, we have already got our credit checks (very interesting and confirmed my score good, his score bad!) and we are putting down a 25% deposit so fingers crossed!! It's interesting to hear that I should only expect to pay 0.75% more, I thought it would be at least 1.5%. My plan is to wait another couple of months for the discharge of the deed to show up on the checks then we'll go for it (but of course I'll check things out with you guys before signing anything!).
I think we'll probably have to go with an adverse lender like GMAC - does anybody know of any high street lenders that are a bit less stringent with their criteria?

UK007BullDog

GMAC is one of the worst lenders out there interest wise, depending on the credit record of your boyfriend You could do better than GMAC.

Make sure you see a couple of brokers before you do anything.

With a very poor credit record the lenders expect you to put down at least 25% or more down as a deposit.

Another thing you need to consider is, which you have not told us, why your boyfriend had such a poor credit record. If I were to buy with a person who has a poor record I would visit a solicitor and get the low down of being with a poor debtor, plus in case you split up you should have something in place that states exactly each persons stake in the property. 7 out of 10 couples split up and you should make sure you are not worse off after the event. If you split up and even if you were to move out you are still 100% liable for the mortgage, the same goes for the other partner (not 50%).

JoanneC_2

Thanks for the advice! Who else could I look at other than GMAC?

UK007BullDog

Well, there are dozens of lenders but it depends on the severity of the credit record your boyfriend has. Then property type is also an issue.

So I suggest you got down to a couple of fees free brokers to pick their brains on this plus take your credit record files with you. Then they will print you off a couple of key features so that you can actually see the fees you will have to pay to the lender and the interest rate of the day. Dont forget stamp duty and solicitor costs.

Stay away from ex-local authority flats and maisonettes over the 4th storey as that would work against you.

JoanneC_2

Excellent advice, thanks very much!

jamesd

A 25% deposit is excellent and it should make things fairly smooth for you. To see what is available from a better vendor than GMAC, take a look at the sub-prime range from BM Solutions. You can only get a BM Solutions mortgage via a broker.

Notice the effect of having an IVA satisfied for six months at the time of the mortgage - it gets you a significantly better deal. So, be sure the brokers(s) take the state when you need the mortgage into account, not just the state today.

Carefully check the initial and later rates and the early repayment charges. In subprime lending it's common to have a low rate for a year or two followed by a high rate for several more years with a high early repayment charge so you can't easily switch.

From the look of it even if a sub-prime mortgage is needed you may qualify for the BM Solution 5.95% two year rate with 25% deposit. That then rises to BoE+ 2.29% but there's no early repayment charge so you can just remortgage to avoid the high rate. Same for their 5.65% tracker.

BM Solutions is a handy vendor because their system lets the broker put in the details of the credit history then BM Solutions says what deals the person qualifies for, so you'd get a yes but the rate would vary depending on the credit record.

This doesn't mean that you need sub-prime or that this lender is best, it's just so you can take a look around and see how the credit history affects the available deals.

JoanneC_2

Thanks jamesd, just had a look at the BM site and it looks like we should qualify! When we go to our broker I'll make sure that BM is one of our options.
Thanks again.