advice please, rejected mortgage :-(

Mazza6059

Well if we don't get the Abbey one then i will try and find a broker to see what they can do.

If we did end up with the shared equity option then our plan would be to re-mortgage at about the 5 year mark [if there was enough equity built up in the house value] and pay off the builders share.

thanks for all the help people, its greatly appreciated.

BitterAndTwisted

If you were truly serious about home-ownership you would have had plans in place to achieve it.

You have debts.
You have no savings.
The deposit is a gifted one and is only 5% of the purchase-price.
You are at the upper-limit of what you might be able to borrow even if you were debt-free and had adequate savings set aside.

I would say that you very little chance of securing a mortgage and really should put your home-buying plans on hold until you are totally debt-free with a decent deposit of your own saved up.

Dave_Ham

I concur Santander is an interesting potential solution.

That said, when you move in together into the new home do you absolutely need 2 cars you are paying monthly for?

If you sold one and paid off finance, it would improve your affordability in the truest sense but also from the lenders perspective and may open a couple more doors.

Good luck

BitterAndTwisted

They've got eight grand's-worth of debt between them plus car-finance? That's going to reduce any possible mortgage-offer by quite a large sum. Even if they did have a decent deposit saved, which they don't.

Notmyrealname

Mazza6059 wrote: »

Bit of background first:
1. We are first time buyers
2. we both currently have debt - my girlfriends has 1k will be cleared before we 'draw down the mortgage' but mine is 7k and won’t be cleared.
3. Combined we earn 45k per year
4. We both have car finance equalling £600 payments per month [combined, not each], mine lasts for another 2 years and my girlfriends lasts for another 1.5 years.

Reality check:

You pay £600 a month for both cars with at least 1.5 years to go = £10,800. So in fact you have over £19000 worth of debt between your girlfriends loan, your loan and the car finance.

You can't afford to live as it is because you dip into your overdraft every month.

Now that the banks have to apply affordability tests you've got no chance until the £19,000+ worth of outstanding debt is seriously reduced. If one of you loses your job through redundancy or illness you'd be stuffed with that level of debt and a £150k mortgage. That is the reason you were refused.

wastedtalent

I'm surprised anyone would give you a 95% LTV mortgage on a new build these days.

bitsandpieces

With a deposit that small, you'll be in negative equity if there's even a small drop in house prices. You may be in negative equity before you move in, if the '2nd hand' value of the house is less than you're paying for it new or if prices fall before it's built. This may not be an issue for you if you're wanting to stay there for a decade or two and have very stable jobs, but this could bite you if you need to sell any time soon.

Your finances seem really tight. I'd give serious thought to whether this is a good idea right now.

Was £150k the asking price for the house? If so, bear in mind that neighbours may have negotiated this down by the time you move in - which may reduce the selling price of all the houses.

jimjames

It seems a real shame that the bank have led you along like this when it should have been clear initially if they wouldn't grant a mortgage.

To improve matters can you try to get the debts under control? At £45k joint income I'd guess you are getting around £3k per month income after tax so it should be possible to not be in overdraft or to start to pay down debts.

It seems reasonable for the bank to not grant a mortgage if you are in constant debt each month and unable to clear it. If you took out a mortgage and have no savings whatsoever then you have no chance to sort any problems that may occur with the house. Obviously a new build will have some guarantees but if it is stretching finances then it may be the best long term decision.

Remember that there are additional costs other than just buying the house itself and if you have no savings then could be in difficulty just getting in the door.

m0bov

You need to clear all your debts and finance...both of u. stop using any overdrafts and pay ur credit cards in full. cancel any store cards and once your totally debt free for 6 months go back to an IFA and try again.

m0t

I have a question about the living in overdraft (not for the OP but for myself).

If I frequently dip into my overdraft in my current account, but have a savings account with the same bank that always has lots of cash in it, will I encounter problems with the mortgage?

Reason is that I get paid at the end of the month, pay off my credit card completely and then calculate roughly how much money I will need to cover outgoings in the month and transfer the rest to savings. Sometimes I'm a little out and just wait to get paid again rather than transfer money back from savings.