95% newbuy mortgage

danpen1306

Hi Guys,

This is my first post so be gentle.

Me and my wife have found a nice Redrow home we like. We want to take advantage of the 95% newbuy scheme. We currently have a home valued around £125,000 - £130,000 and have a outstanding balance on our mortgage of £111,000.

This new home is priced at £180,000

Does this sound possible to achieve?

My income is £31,000 and my wife's is £26,500

I have a credit score of 506 and have never ever missed or had a late payment. There is not one negative mark on my credit report. I have a credit card balance of £10k and have an overdraft as well as 2 finance agreements. We also have a joint loan with the AA.

My wife has a very good credit rating too and she also has a credit card balance of around £7k.

We would be getting our 5% deposit from the sale of our house.

We are due to seek mortgage advice next week but want to prepare myself a little


Thanks in advance guys

Southernman

You mention a loan and credit cards with large limits.

How much do you have outstanding in terms of debts?

beachie

What are your monthly payments on the loans? These will have the biggest impact.

The credit cards and loan payments will have a significant effect on the amount you can borrow.

Without any credit card debt you could potentially be granted a mortgage for around £240k.

danpen1306

I pay £220 p/m on the credit card and it's up to its limit.

Think my wife pays around £150 p/m on her card

We owe £9k on our loan and have 3 years left until its paid up. We pay £220 p/m on the loan

squeeks

Between you, you have:
17k credit card debt
111k mortgage debt
9K Joint loan debt
(137k outstanding debt)
But you also have:
X overdraft debt
2x financial agreements for Y debt

You've estimated your house is worth 125-130k assuming you can actually get this amount for it, you have nothing left after you have cleared the credit cards and the mortgage, except for the overdraft and the financial agreements.

You know you also need the following to move:
a deposit
estate agent fees (to sell the house)
stamp duty (to buy the new house)
Solicitor fees
Surveys
possibly a mortgage fee
and all other costs associated with moving...

Your joint income should easily cover the mortgage, I hope your debts are coming down, rather than still going up!

I'm not a financial advisor, but I can't see how the numbers are adding up - I'm assuming the loans, overdrafts etc.. are for thousands, rather than £50 - £100 each..

If the figures do add up and a mortgage advisor can find a way, good luck to you!

*edited to add 9k loan.*

shortchanged_2

It looks like it is way out of your league.

You have substantial personal debt and you are looking to borrow more than 3 times a joint income.

Do you actually think you will be able to cope with a significantly bigger mortgage as well, bearing in mind it will also be at a rubbish rate?

danpen1306

Do you think paying off the 2 finance agreements and reducing the credit card bill is worth it?

Reason I ask is I'm selling my car at the moment and would use the money to do this? Would it make significant difference?

shortchanged_2

I take it by the fact that you are looking at this 5% deposit scheme, even with your current relatively small mortgage and decent income you have no savings?

So does that mean you are already living beyond your means even without taking on a bigger mortgage?

Sounds like a recipe for disaster.

danpen1306

The reason we have no savings is because we've got married, bought a house at the wrong time and had a baby. This has all happened in the space of two years. We could save up a decent deposit over time but we really want to move now to a better location to bring our baby up and be surrounded by better schools.

We certainly don't live beyond our means. I have £900 free cash after all bills etc are paid each month and my wife has around £700.

I do see your concerns though and thanks for taking the time to reply

squeeks

Well you have a plan then.

You need to move to a better area for schools, by the time your child is of an age.

So start planning now, how you will get there.

The joint loan will be gone in 3 years.
Can you pay the credit cards off in the same time frame?

If you can over pay on the mortgage, it will increase your equity when you come to move. House prices are on a downward trend at the moment, so it will also help with LTV ratios and stop you getting trapped by negative equity. Get this balance looking healthier and you will have the option to switch to cheaper mortgages when the offers come up.

The houses you want to buy cost around 180000.
You will need 18k or more in cash for your 10% deposit. - I am making the assumption that newbuy, while it sounds good on paper, will cost an arm and leg with rates and should be avoided. Also aiming slightly high gives you a better chance of getting where you need to be.
2k-ish for stamp duty
2k-ish for solicitors
another 2k for sundries

So you will want to also save 26k over the next 3 - 4 years, in addition to paying off the 26k debt + overdrafts.
To do this you are going to need to set aside 1 - 1.2k every month for the next 4 years between you. If you are used to lots of discretionary spending, it is going to be hard work, but not impossible.

Start with your most expensive debts. This will probably be your overdraft and your credit cards. Once the debts are cleared (unless they don't cost you anything), then start saving.

If you are financing a car - don't unless a new or nearly new car is a work requirement. There are 1 - 2k cars out there that will need next to no maintenance and if they only last a year, you are usually are still better off than getting a finance deal.

Probably not the best time to bring it up, but have you thought about planning further ahead such as your retirement. Or even having 6 months day to day living costs as a buffer in case things go wrong.

The debts are your priority, including the mortgage! But your spare cash probably shouldn't be as spare as you think it is.

shortchanged_2

So what is happening to your £1600 underspend every month?

Because it shouldn't take you long to get a half decent deposit with being able to save that much each month.

Saying that, you could really do with paying off your debts first.