Chance of us being able to get a mortgage next year

koneko

Hi All, I haven't posted in this forum before but have been reading quite a few of the threads. After doing so, I'm a bit concerned about whether my partner and I are likely to be able to get a mortgage next year.

Back in 2008/2009 I was in a bad and abusive relationship with a guy who was absolutely terrible with money. We were living together and I ended up paying the majority of the household bills etc as he rarely had enough money for his half. Stupid of me, I know, but when you are in that kind of relationship, sometimes it takes a while to realise whats happening and what its doing to you. For me the realisation came towards the end of 2009 when I was disgnosed with depression caused by the stress of the relationship and debt worries. I had defaulted on a loan and 2 credit cards as I couldn't afford the payments and ended up on a DMP. I think at the worst point I had approx 15k of debt. At that point I walked away from the relationship, I lost money in the process but it was absolutely the right thing to do.

Now I have a wonderful partner and have never been happier, we have been together 2 1/2 years and renting together for 2 and are talking about buying a house next year. My debts have all been settled over the last few years, a hard process but so rewarding when each was paid off and my partner and I have been saving for a deposit. I've been lucky enough to advance my career in the last couple of years as well so I'm now on a good monthly salary.

So my question is, do we have any chance of getting a mortgage next year?

The house value would be around £200k (we live in an expensive area). We will have 12k saved by June this year and hope to have 20k when we come to look at applying for a mortgage. This would have been more but my main focus has been clearing my past debt.

We are 27 and 28 and earn 55k a year between us. My partner has a good credit history.

My defaults were recorded:
29/09/08, 23/10/08 and 28/02/09 and these are all settled.

We have interest free finance on a sofa due to end before we apply for a mortgage and both have a credit card which is paid off in full each month. Other than student loans, we have no other debts.

Thanks for reading and sorry for the long post!

Thrugelmir

When did you finally settle your debts? As this is what's key. Not the original default date.

koneko

1 was settled in 2011, the other 2 mid last year after I got a new job early in the year and started bringing in an extra £7500 a year (these 2 were with the same company and were under a DMP with them). I must admit I didn't realise it would rely on the settlement date - I thought it would be the default date. Does this mean that I will have to wait 6 years from the date the last one was settled?

Thrugelmir

Lenders compile their "credit score" and vet your application using the past 6 years (72 months) history. So the lender can set any criteria they think fit when processing it.

Criteria is set to filter out applications. Lenders only have finite amounts of money to lend. So the bar can be raised to fit the product as well, i.e. the higher the LTV.

koneko

I was under the impression that defaults would drop off 6 years after the default was registered, is this not the case? Does this mean we will not stand a chance of getting accepted anywhere at a decent interest rate? I don't mind paying a little more but nothing too excessive. Surely the fact that I've managed to pay off 15k of debt and save half of a 20k +budget should help to prove that I am now very disciplined with money.

Thrugelmir

Defaulting on a debt is one issue.

The time to repay is the second.

As all the time the debt remains in arrears of payment, i.e. outside of contractual payment terms. The debt will score as being in default.

The original default notice will drop off after 6 years. However until settled will also score negatively.

This is to stop people abusing the system to their advantage. The quicker debt is repaid the better for the individual.


Unfortunately statistics show that a defaulter is highly likely to reoffend. Hence the heavy loading by lenders. All down to human nature.

koneko

I have to say as someone who has been through these money problems, it has made me hugely aware of everything I spend and I budget rigorously to avoid every falling into problems again. I honestly think that it makes me far less likely to ever have problems again, but then these things always come down to statistics. Does this mean the defaults will show on my account until 2017/2018 as that's a horrible thought.

Thrugelmir

koneko wrote: »

I have to say as someone who has been through these money problems, it has made me hugely aware of everything I spend and I budget rigorously to avoid every falling into problems again. I honestly think that it makes me far less likely to ever have problems again, but then these things always come down to statistics. Does this mean the defaults will show on my account until 2017/2018 as that's a horrible thought.

Over time they'll drop away as the months pass.

Why does it come down to statistics? Because people can be characterised by their behaviour and therefore attitude to money. Like a gambler who bets more to recoup what he's lost.

Don't take this personally. As many people do realise the error of their ways. Lenders have to base their decision on something. So six years is deemed a sufficent time.

Keep saving. Pay your bills on time and you'll get there.

Utility companies will be reporting to Experian soon. So the net is closing in on serial defaulters.

koneko

I did a bit more reading around the forums last night and everything I have read seems to suggest that a defaulted account will drop off my report 6 years after it was registered, regardless of whether it is satisfied or not, but a normal settled account that isn't defaulted will drop off 6 years from settlement date.

If this is true, my report should look far better by autumn next year as all 3 defaulted accounts would no longer be visible.

I think its great news that utility companies will be able to record payment activity on credit reports. I heard a rumour that lettings agents may be able to do the same from April this year, but not sure if this is definitely the case. It would be great if it was as I have been renting for 6 years and never missed a payment.

Dave_Ham

After 6 years from the exact default date, the defaults will come off the file. This is irrespective of if they have been settled or not.

If you entered into a payment plan (DMP) then the AP marker may hang around a tad longer, but is not as damaging as the default itself.

With a 10% deposit and these default on the file (even that they are in the last year) a mortgage will be difficult to achieve.

When they come off, or a 15% deposit and the world will become an easier place.

All the best.

droiderm

Dave_Ham wrote: »

After 6 years from the exact settlement date, the defaults will come off the file. This is irrespective of if they have been settled or not.

Default date