Mortgage Advice Please

mortgage_wannabe

iwb100 wrote: »

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.

I'm not paying any interest on credit cards, they're all on 0%.


And yes, I have some separate money for the fees.

mortgage_wannabe

R_P_W wrote: »

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.

So it's impossible to get a mortgage if you have existing borrowing, that seems to be the general consensus?

mortgage_wannabe

kingstreet wrote: »

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.

Thanks Kingstreet, that's useful to know. How does that apply to Loans and Car Finance?


I want to understand how the process works so that when i'm ready to apply, i'll know what to expect.

iwb100

mortgage_wannabe wrote: »

I'm not paying any interest on credit cards, they're all on 0%.


And yes, I have some separate money for the fees.

Credit Card 1 - Halifax All in One (16.9%) - balance is £1,300 (£780 of it at 0% promo rate) and we pay £35 a month (minimum payment is £19).

Is what you said in your first post. So I assumed that you were paying interest on £520 on that card (1300-720). Perhaps an error on my part?

mortgage_wannabe

Is it advisable for me to pay off the Credit Card debt with my deposit, and then use the money I would be saving on repayments to start saving?

I'm saving money at the same time anyway at the moment so wouldn't that be going too much the other way?

E.G. I have £4K on 2 credit cards - I could pay those both off now and then save up the £100 a month I pay towards those bills - in 12 months time (when I will have a clear credit report) I will have £0 credit card balances and an extra £1200 saved.

Is that what i'm being advised?

mortgage_wannabe

iwb100 wrote: »

Credit Card 1 - Halifax All in One (16.9%) - balance is £1,300 (£780 of it at 0% promo rate) and we pay £35 a month (minimum payment is £19).

Is what you said in your first post. So I assumed that you were paying interest on £520 on that card (1300-720). Perhaps an error on my part?

Apologies, you're right, I overlooked my own information!

kingstreet

mortgage_wannabe wrote: »

Thanks Kingstreet, that's useful to know. How does that apply to Loans and Car Finance?

They take the actual monthly loan payments and deduct them. I suggest you have a play with a lender's online affordability calculator.

If you have a particular developer in mind, you should be able to establish which Newbuy lender(s) it is aligned with.

Thrugelmir

mortgage_wannabe wrote: »

I could pay my credit card bills off with my deposit but then I wouldn't have a deposit would I?

Correct. So as a lender I would say that you've saved no money. You've borrowed it. Which in turn means you are stretching yourselves financially. Do I want to underwrite that risk? When there are people in better financial positions applying to borrow money from me.

mortgage_wannabe

Thrugelmir wrote: »

Correct. So as a lender I would say that you've saved no money. You've borrowed it. Which in turn means you are stretching yourselves financially. Do I want to underwrite that risk? When there are people in better financial positions applying to borrow money from me.

Yes because the lenders don't borrow money either do they? And they certainly don't fix the rates so that it's cheaper for them to do so, oh no no.... :-)

At the end of the day, it comes down to affordability for me. We pay £600 rent a month and £500 childcare and yet I still have £6000 in my bank account as we speak. Okay, I have some servicable debt alongside it as well but I have more than enough scope to move things around and live comfortably.

Our childcare costs reduce by over £100 a month when he reaches the age of 3, our car finance is paid of fully in a year (saving £115) as well, my mobile phone contract expires in a couple of months (saving £40 a month if I want it to) etc.

If a lender gave me a mortgage at £600 a month, this time next year i'd also have a few grand in the bank as well, so it's kind of farcical to suggest that I couldn't afford it but that's just my opinion.

mortgage_wannabe

Just to give an update on this - I have just received my formal mortgage offer and am in the process of buying my first house.

Don't let the doom mongers get you down :-)