moving house is it possible?

minniemeandyou

Its my first post so please be gentle!!

Me and my husband have a morgage for £81500 our house is valued at £95000 we have had the house for 6 years and arent on a fixed rate interest is currently 2.5% i think.

we have a small amount of debt £4000 in overdrafts

we have previously been declined a loan

we have a joint income of £44000

we dont have creditcards/loans but do have 2 cars on finance which cost £500 per month total

my questions to the wise folk of MSE are,

1) do we need a deposit for a bigger house looking at about £140k house? if so how much?

2)are we likely to be declined a mortgage due to the debt?

3) should we pay of the debt before considering moving house?

Thanks in advance Minnieme

Dave_Ham

You are likely to require 10% deposit, made up from house sale I assume..?

If you are happy a bigger mortgage is achievable and can manage the debt, then the lender is likely to be ok with the debt given your income.

Remember your new mortgage is unlikely to be at 2.5%, speak to current lender about porting first although the extra will be at a different rate.

minniemeandyou

hiya yes there would be £15000 equity from house sale (ish) but would we need to save also? I am aware of the interest rate it would be lovely at 2.5% but am aware that this is unlikely to continue

Thrugelmir

minniemeandyou wrote: »

we have a small amount of debt £4000 in overdrafts

The inference would appear to be that you don't control your spending. So will severely impact your credit rating.

minniemeandyou

The debt is from my student years I dont have a student loan and have paid off 4grand this year alone, to do this I have controlled my spending and reduced the debt substancially

Thrugelmir

minniemeandyou wrote: »

The debt is from my student years I dont have a student loan and have paid off 4grand this year alone, to do this I have controlled my spending and reduced the debt substancially

Not being judgemental. Merely taking a lenders perspective.

The fact that you have an overdraft of any kind will negatively score against you with the main lenders.

minniemeandyou

ok well im a hoping to be out of debt by april, and will wait to move house until then, will this help or will they still see it a bad as i have been in debt in the past few years?

kingstreet

A lender views your credit use and determines if it will impact on affordability, unless you've had negative issues, such as late or missed payments, defaults etc.

Credit with less than six months to run is normally ignored.

You'll normally need 10% deposit as a minimum, plus the money for fees, stamp duty etc. For estate agency, legal fees and stamp duty, you should allow £5k, so you will need to save at least £4k, assuming your sale value is as you've said.

Assuming you have a good history with your current lender, you should be looking to "port" your current rate. This means you'll apply to your current lender for a new mortgage when you sell and find a new house. The first part of the new mortgage, £81,500 can be taken on the rate of your current mortgage, 2.5% with any extra borrowing offered on one of the lender's new offers. You'll have one new mortgage split into two sub-accounts,one at £81.5k and the other at say, £44.5k if you buy at the £140k mark.

Remember, porting does not confer a guarantee of a new mortgage. You'll have to satisfy the lender's status and criteria requirements just like any other borrower.

R_P_W

In my opinion you should wait and concentrate on clearing as much of your debt as you can over next year. Then save as much as you can to cover any shortfall in deposit requirements and selling/buying costs.

You will also have to account for that fact that your house being valued at 95k doesnt mean it will sell for that. My house was valued at 99,950 and 10 months later its still on the market but at 88k.