part mortgage/part unsecured loan - Good idea?

darkniven

Hi all,

I'm a first-time potential buyer looking at buying the house I am currently renting off a friend at the moment (asking price £121,500).

I have no deposit.

I visited my IFA yesterday to see what mortgages are available to me.

He has said that, due to the amount of debt I have (18k on a salary of 30K) that a normal mortgage will not be available to me for the price of the house I was buying, and my only real option is to go for a part mortgage/part unsecured loan which would incorporate all my outstanding debt.

We looked at "worst case scenario" with regards to payments/interest rates etc, and he came up with Northern Rock @ 6.79% fixed for 5 years.

The offer is pretty tempting as I can't see myself clearing those debts for at least 4/5 years anyway, and this would enable me to consolidate everything whilst buying a property. Certainly in going ahead with the mortgage I'd be paying a smaller total payment than I am now in both rent and debt repayments.

Does it sound ok? As I said, the figures given were "worst case scenario", so a better rate may be available?

MortgageMamma

I cant really comment on what rates are available but there are several providers who do these types of mortgages

Your IFA is right, you are most unlikely to be able to raise the sum you want with the debt you have

In my opinion his advice seems spot on, so long as he told you those debts would be spread over the term of the mortgage and ultimately you will pay a lot more interest on them

Leon_W

Pretty much agree with MM.

You don't have to consolidate your loan and it would be wise to pay it off as soon as you can but however when needs must etc.

I'm guessing here that your adviser has gone with the 5 year fixed because of the higher income multiples available ? With that in mind (but without knowing your circumstances) I would say that Northern Rock may be your only option as other lenders that have a similar product are not usually half as generous with the actual amount they will lend.

MarkyMarkD

Another lender to consider is A&L.

If you want to borrow £121,500+£18,000 i.e. £139,500 at an LTV of just under 115%, you can get a 5 year fix from A&L at only 6.08% with a £999 fee.

Details here: https://www.secure.intermediary.co.uk/Product_Navigation/Unsecure/Products/PlusMortgage/Products/Portfolio/Home_PlusMortgage.asp?stream=PlusMortgage

If you have no debt other than the £18k you wish to consolidate onto the mortgage, and a good credit history, A&L should do the amount you require. Their affordability calculator suggest a maximum of £146k based on £30k income and no outstanding debts.

dwight-van-man

Be wary re the A&L option - apparently their BDM has called a number of his brokers to say not to state debt consolidation as being a reason for captial raising - so may pay to double check this at the outset...

MarkyMarkD

That's interesting, d-v-m. Surely debt consolidation is the biggest reason for people wanting to buy >100% LTV mortgages?

dwight-van-man

MarkyMarkD wrote: »

That's interesting, d-v-m. Surely debt consolidation is the biggest reason for people wanting to buy >100% LTV mortgages?

I know - doesn't make sense. I can't find anything on their website to this effect but it seems to be a really tightly underwritten product so perhaps their credit score is more heavily weighted against debt consolidation than say, home improvements etc and this is where the feedback stems from...

AndyWallace

The problem with A&L is that they are going through significant changes and are in their infancy with these.

Adverse Lending & 100+ Mortgages.

I used to think they were the bees-knees but find them quite frustrating at the moment, unable to accurately indicate the client options and too much doubt when asking difficult questions.

Stick to the standard stuff for now and try again in 6 months if they are still transacting this type of business.