Just paid off debt management plan early - chances of getting a mortgage?

clockwork12_2

Hi, I have been on a DMP for the past 3 years. As my financial situation improved I was able to pay off my creditors early and close my DMP.

My partner and I currently live in rented accomodation and wish to purchase a property.

As all our savings have gone into paying off the DMP our only option for a mortgage would be one of the new build schemes 95% deal or shared equity also on new build as we would be unable to get anymore than about 5% for a deposit (we are looking at new builds just under 200k).

Our combined annual income is 56k, my partners credit is fair as she has also a default on her account.

What are our chances? Anyone been in a similar situation? Any advice much appreciated.

sammyjammy

Pretty much zero IMO unless you want to pay hugely punitive rates

Fire_Fox

Welcome and congratulations! You generally need a 10% deposit plus money for legals and survey plus three months mortgage payments set aside in case something unexpected happens and you cannot work. I doubt you would get an adverse credit mortgage without a decent deposit and/ or paying a high interest rate, which puts you back where you started with debt. TBH if you cannot save this up you cannot afford to own your own home, there is more than just the mortgage payments to consider. IMO spend some time saving up and building up a good credit rating again.

clockwork12_2

I think sadly you are right. The annoying thing is however that whilst we pay rent (and someone elses mortgage in that sense) it is difficult to save up enough for a large deposit as we currently pay the same in rent as a mortgage (even on a reasonably moderate/high rate) and whilst we can comfortably put money away to save each month, it will take a while to get that kind of money saved.

The total DMP was for under £10k and at the time my situation was different. For a relatively small debt it really was not worth doing - you live and learn.......

Fire_Fox

clockwork12 wrote: »

I think sadly you are right. The annoying thing is however that whilst we pay rent (and someone elses mortgage in that sense) it is difficult to save up enough for a large deposit as we currently pay the same in rent as a mortgage (even on a reasonably moderate/high rate) and whilst we can comfortably put money away to save each month, it will take a while to get that kind of money saved.

The total DMP was for under £10k and at the time my situation was different. For a relatively small debt it really was not worth doing - you live and learn.......

Can you downsize whilst you save? Take in a lodger (if you tenancy agreement permits)? Relocate and give up one or both cars (if you have two)?

You can get into a lot more debt than that by rushing into buying property with 95% or 100% mortgages. Plenty of people are in tens of thousands of negative equity, plenty more repossessed because they didn't have three months mortgage payments in savings.

clockwork12_2

I think we will have to try something like getting rid of one of our cars and just staying in rented until we have enough. We have just had a baby as well (hence the want for more stability) and that pushes thing up.

I guess there is no easy-fix and as i say, you live and learn.

I imagine that these shared equity deals can land you in negative equity as well.

Fire_Fox

Why not ask your current landlord for a longer fixed term contract, perhaps two years with a one year break clause, if you want stability?

clockwork12_2

We could do Firefox but it is depressing thinking we will be nearly 40 odd before we can buy our own home

I guess if we saved all we can for the next 6 years (the time it takes for the dmp to come off record) we would be in a better position and likely have at least 25% ready for a deposit and hopefully be able to get a more reasonable mortgage rate

hoo hum

julieb1987

I don't mean to sound ageist but if you're in your fourties (nearly) this will also go against you. A 95% mortgage over 20 years with a poor credit history is going to mean huge monthly repayments. Go and see an independent financial advisor and see what they suggest.