Will my bad credit rating affect my mums ability to get a mortgage?

MrsAandBaby

Looking for some advice. I have been in a debt management plan for nearly 2 years now. My property is a joint mortgage between me and my mum (for the last 4 years) although she doesn't live here and I am responsible for payment etc. I am currently planning on selling my house and using some of the profit to pay my debts off and use the rest for a deposit on a new property. My mum has agreed to take the mortgage in her name as she knows I will be turned down. She has a good credit rating with 1 credit card only and owns her own home out right. I wondered if my credit rating would affect her new mortgage application for my new place and if we were now 'financially linked'. This is the only thing we have in joint names and I have never missed or been late with any mortgage payment. Can anyone advise? Its a difficult situation as I know it takes 6 years after settling creditor accounts for your credit rating ti start getting better. I have a good amount of equity in my house and it makes sense to me to sell it and pay off my debts and start on the housing ladder again but not sure its going to play out that way.

ACG

Yes it will.

You would need to sell the house, write to the credit reference agencies asking them to "un-link" you. Wait for it to update then your mum should be able to re-apply without any issues.

MrsAandBaby

Thanks for the help - great piece of advice. Are there just the 2 credit ref agencies? and how long is the 'un-linking' process likely to take?

ACG

Equifax, Experian, Callcredit i think is the last.

Ive only done it with experian, it took about 3-4 weeks, as it was part way through the month i then had to wait for it to update which was another 2 weeks i think.

Is your current mortgage portable? That could be another option for you?

MrsAandBaby

I'm not sure it would be worth moving the mortgage as it was take at the time the market crashed and it was almost impossible to get a mortgage so it is a 5year fixed rate (1 year left) at 7%. When i looked into selling it worked out better to pay the ERC than to pay the mortgage at 7%.

ACG

Dont forget its the early repayment charges and any fees involved for setting up the new mortgage....and the risk it wont get accepted.

I know what you mean though, i contacted someone who had a 7% interest rate earlier this year, even after paying the fees i managed to knock about 10 years off his mortgage AND save him about £100 a month. Im just thinking that it might just be easier to pay more but be secure in the fact you have a mortgage.

Atleast its something youve considered, just make sure you think about all the aspects of it.

MrsAandBaby

How would transferring the mortgage to a new property work when I have bad credit? I don't intend to look for a new house until mine is officially sold so not sure the times scales would work. The plan is to move in with my parents temporarily until we get a new house. Should maybe have said we live in Scotland, I know sometimes there are different rules here to the rest of the UK.

Dave_Ham

Transferring the mortgage to a new property is unlikely to be an option, as it is viewed as a new mortgage and therefore with credit scoring probably a no-no

I actually disagree with ACG unusually, that all new banks would assess your Mum and you jointly based upon some financial links. The skill is knowing which ones and approaching the lender appropriately.

The credit de-linking is still best practice, but usually does not create an issue.

Some more considerations that may have been raised will be that if you are not on the mortgage/deeds and Mum is not living there most lenders will have an issue with this.

What exactly is the figure for your Early Redmeption in £ value. Remember that many decrease the further you are in the fixed rate period..

With a bit more information here or obtaining a decent broker, you should be able to advantage your situation but there are a few considerations...

ACG

Dave has more experience than me so listen to him - im only going off my experience which is quite limited.

I learn things on here too

Dave_Ham

To be fair, your approach is the best in the long term as there are lenders that automatically connect but typically on unsecured credit..

If you have the time to de-link, then absolutely do it. Alternatively, ensure the lender selection is spot on and it is likely to be overlooked..

All the best