Mortgage Advice Please

mortgage_wannabe

Hi, i've been reading this forum for a few weeks now whilst my partner and I ponder whether to apply for a mortgage.

Apologies for those who may be a bit sick of reading the same kind of requests for advice but I understand that each individual case is different to another so I may gain some benefit from asking some questions.

I'll lay bare mine and my partners financial situation to see what the general consensus is. I'll be putting quite a bit of information in this post, please let me know if this is considered risky in any way? We are looking specifically at the Newbuy scheme.

Price of Property we're interested in - £113,000
Deposit we have - £5650

Our Existing Credit

Loan - £79 per month repayment (balance is around £4K) - this is not on any CRA file as it's a staff loan and did not require a credit check (I work for a bank but i'm not a banker).

Credit Card 1 - Halifax - balance is £1300 and we pay £35 a month.

Credit Card 2 - Barclaycard - balance is £2600 and we pay £62 a month.

Car Finance - Black Horse - balance is now under £2K and we have just over a year left to pay (£115 a month).

Overdraft - I have a very low interest overdraft of £1000 (a perk of the job) and use it sometimes, especially in the run up to christmas and bonus time.

That is all of the credit that we have (this time last year we didn't have any credit cards but we treated ourselves to a couple of things). We could clear those debts now but want to keep the cash we have for a deposit.

Work

We are both permanently employed - I have been with the same company for 5 and a half years and my current basic salary is £25K. I earn around £2K in overtime (over £3K actually this year) and I also receive a yearly bonus (£9K this year - £5K last year).

My partner has worked for the same company for 10 years and earns £20K a year with a bonus of around £500.

Dependant

We have a 2 year old child who is at nursery full time. We pay for this with voucher schemes in work and have to top it up with a payment of around £150 a month. In real terms, it costs about £500 a month. This will reduce once he turns 3 as the government pay 15 hours of childcare a week (should save us more than £100 a month).

CRA Files

My partner has a very good credit history (she had some problems but they were over 6 years ago and have well cleared the file which now looks squeaky clean). I have one default on my file from 5 years ago for a mobile phone contract (this is also a CCJ on my Call Credit file but not on Experian or Equifax, only the default shows on those). The value of this is £184 and is not settled because it remains in dispute.

I have a few '3's' on an old Alliance and Leicester account from 5 years ago as well due to bank charges whilst on holiday (this was in dispute but was halted by the overall bank charge court case). This was settled and the account closed.

The Halifax Credit Card is mine - I was surprised that I got it based on the Default I have as it's one of their best deals at 16.9% so that gives me hope?

Based on this information, what do people think of our chances at the purchase price considering it would be a NewBuy transaction?

mortgage_wannabe

Forgot to add that we rent at the moment and that costs £595 PCM.

shonzyd

by the sounds of it you have a 5% deposit, are you looking to add to that or are you asking if you could get a 95% mortgage?

If youve got unsettled defaults and a ccj and looking for 95% ltv, i would say no chance, but im not a broker so im sure someone will be able to give you a more detailed response.

mortgage_wannabe

shonzyd wrote: »

by the sounds of it you have a 5% deposit, are you looking to add to that or are you asking if you could get a 95% mortgage?

If youve got unsettled defaults and a ccj and looking for 95% ltv, i would say no chance, but im not a broker so im sure someone will be able to give you a more detailed response.

Thanks, appreciate the response. Yes, i'm trying to figure out if I could be eligible for the NewBuy scheme despite the Default. The scheme onl requires a 5% deposit and there are other potential factors like the builder paying 5% on top as well. I don't expect the answer to be yes, I don't have any expectations really.

The Default will drop off my file in February next year so I presume that this would strengthen my chances a lot? What about everything else about my financial circumstances, do they seem strong enough without the Default? (These questions are directed at any Brokers on here I suppose).

I'm fully prepared to continue saving until next year but my tenancy is up soon and the Estate Agents have a habit of charging ridiculous admin fees to renew (they don't give the option of a periodic tenancy) and we really want to buy a house now as we're a growing family.

So as I say, i'm fully prepared to wait but just wanted to be sure about where I stand now as I would hate to find out in the future that I could have taken the plunge earlier.

mortgage_wannabe

What are the thoughts of any brokers on this board?

mortgage_wannabe

Pretty please with sugar on top? :-)

Thrugelmir

Start by repaying your credit card debts. As on the face of it you are borrowing 100% of your deposit.

If money is tight. Suggest you spend some time on the Debt Free Wannabe board. Great bunch of people with lots of advice on how to economise.

Would appear that you just need to manage your finances better in order to get onto the ladder.

CCJ will be detected on application. As Court register is checked as part of the application process. This will drop off after 6 years. (Assume it was settled promptly as well).

mortgage_wannabe

What do you mean by borrowing the deposit? The credit card balances have nothing to do with the deposit. I could pay my credit card bills off with my deposit but then I wouldn't have a deposit would I?

I don't have a debt problem, am paying back more than is actually needed and also paying no interest.


We decided to treat ourselves to a couple of things during the course of the year - is that not what these credit companies advertise?


Are we saying that anyone who has borrowing elsewhere should not be able to get a mortgage even when the repayments would be less than they currently pay for rent?

iwb100

mortgage_wannabe wrote: »

What do you mean by borrowing the deposit? The credit card balances have nothing to do with the deposit. I could pay my credit card bills off with my deposit but then I wouldn't have a deposit would I?

I don't have a debt problem, am paying back more than is actually needed and also paying no interest.


We decided to treat ourselves to a couple of things during the course of the year - is that not what these credit companies advertise?


Are we saying that anyone who has borrowing elsewhere should not be able to get a mortgage even when the repayments would be less than they currently pay for rent?

I think that's exactly the point being made. In order to "afford a deposit" you have a credit card debt. A lender may or may not be bothered about that, others will be better qualified on that one.

But from a sense point of view, why go into buying a house when technically and actually you are carrying debts into the process? You may end up in more debt over the cost of moving, legal fees, survey fees etc (unless you've got money saved for those costs as well?)

On a basic balance sheet if you've got debts such as a credit card (especially the chunk you're paying interest on) your savings should be used to pay that off. Because the interest you are paying on the card is being frittered away for no good reason.

kingstreet

Regardless of what you're actually paying and the rate which applies, lenders apply a set percentage to credit card debt when establishing affordability.

Halifax, for example, takes the monthly cost of credit card debt at 5% of the balance.

A £5,000 card debt will see £250 a month deducted from income, costing your maximum mortgage about £15,000.

R_P_W

mortgage_wannabe wrote: »

What do you mean by borrowing the deposit? The credit card balances have nothing to do with the deposit. I could pay my credit card bills off with my deposit but then I wouldn't have a deposit would I?

I don't have a debt problem, am paying back more than is actually needed and also paying no interest.


We decided to treat ourselves to a couple of things during the course of the year - is that not what these credit companies advertise?


Are we saying that anyone who has borrowing elsewhere should not be able to get a mortgage even when the repayments would be less than they currently pay for rent?

Where to start!

Well you said it yourself, if you paid off your debst with your savings you wouldn't have anything left - not end of the world but you probably need to save twice what you have now.

You are going to be applying for a 95% product which are extremely difficult to get, especially with defaults and outstanding debt.

Lenders of course take existing borrowing into account when considering further lending.

Nothing wrong with treating yourself as long as you can pay it back. And looks like you can pay it back, but you probably wont be able to get your mortgage any time soon.