Wishful Thinking or A Slim Chance?

Jana83

My BF & I are currently renting (it'll be 2 years in Sept) and are starting to wonder if we will ever be able to get on the property ladder. Our current situation is as follows:

I have around 10k saved in an ISA, to which I add £125.00 every month. My BF also adds £125.00 per month (that's a minimum of 3k per year between us - small odds 'n' sods will be added here 'n' there where possible).
I also have a savings account to which I add £125.00 per month for emergencies & car stuff (tax, insurance, MOT etc). My BF saves £100.00 into his own savings account. Both these accounts get topped up whenever there are spare funds.

My credit history is 100% clear & my BF has just finished paying off his c/card. He has new one now so that he can start to rebuild his credit score.

Would it be advisable to start looking at 5% mortgages or should we keep saving until we can do around 10%?

The other possibility would be to ask my parents for around 10k (to pay back over 5 years) so that we would have a higher deposit (pay less back to the bank).

I'm starting to worry that we'll miss the boat & house prices will start to rise again sharply! Houses in our price range go after a month or so

Any advice will be much appreciated

PS: we are looking at houses in Bristol - nothing special tho! So around 125k to 140k.

ACG

When you say he has paid off his credit card and has got another to repair his credit score - that makes me think there are missed and/or late payments lurking around?

If thats the case, i would forget 5% deposit.
If they are atleast a year old and he has since had decent credit then you MIGHT get away with a 10% deposit. Anything more recent and i would say you are looking at a 15% deposit really.

As for the borrowing £10k off your parents, lenders wont accept a loan as a form of deposit. They may accept a gift, but your parents would have to sign legal documents to say theyre not expecting the money back and have no say over the property.

Turnbull2000

You'll be able to get a great interest rate on a 5% deposit once the Help to Buy government support scheme comes into force next year.

It's indeed likely that house prices will shift upwards sharply as the subsidy is priced into values, so those that get in quickly will benefit the most.

Unfortunately, you can also expect fierce competition from BTL investors, as they too are set to benefit from state support through Funding for Lending.

Good luck!

Jana83

My BF did indeed have missed & late payments on his loans and c/cards but everything has been paid now and the accounts are closed.

We're not expecting to be able to do much until summer next year at the earliest, so hopefully his credit score will be much better by then.

We were looking at the new Govt scheme being introduced next year but are concerned that house prices will rise crazily as lots of FTB & BTL investors will get in on the deal too.

Jana83

*Update*

BF had a small loan approved this week, so this shows that his credit rating has improved!

ValHaller

Jana83 wrote: »

*Update*

BF had a small loan approved this week, so this shows that his credit rating has improved!

Nothing to get excited about.

No lender of any sort actually uses the Credit Referencing Agency so called 'credit scores'. They all use their own scoring mehtods and the scoring for mortgage lending will be very different from that for consumer credit. If the Credit Referencing Agency so called 'credit scores' have any meaning, they will be most akin to a consumer borrowing score - whereas you want a mortgage. What is good for consumer borrowing may be bad for mortgage borrowing.

Stop playing games to boost his credit score. You will probably do more harm than good.

ACG

Why are you applying for loans if you have savings and are looking to purchase a house. Making applications will not have a positive effect - it will also cost you more as your paying interest on it.

ruggedtoast

I hope its not Wonga...

Jana83

Wow! Wasn't expecting such negativity about such a small comment.......
Obviously we are very naive when it comes to mortgages & credit scores & whatnot!
I was just trying to say that despite his poor credit history, my BF is taking steps to better his finances - no harm in that surely?

As for "ValHaller", we are NOT playing games - I NEVER joke about money

TMC35

Jana83 wrote: »

Wow! Wasn't expecting such negativity about such a small comment.......
Obviously we are very naive when it comes to mortgages & credit scores & whatnot!
I was just trying to say that despite his poor credit history, my BF is taking steps to better his finances - no harm in that surely?

As for "ValHaller", we are NOT playing games - I NEVER joke about money

Hi Jana83,

I think what people are trying to say rather bluntly is that too many or any credit checks prior to applying for a mortgage will be viewed as a negative thing, as from the banks perspective you are seen as seeking additional credit, i.e you are not living within your means. I can see why you would think applying for a loan might help but at this stage you're better option is to pay off any credit you have, close unused accounts etc.. a credit card that you have already, use every month and pay off in full will be fine as it shows you are able to manage money, but I would avoid at all costs applying for any more credit now.

As mentioned before, does he have any late/missed payments, defaults etc? as these are what the banks will view negatively not the actual score.

With regards to house prices going up sharply next year and the availability of cheap 95% deals as mentioned earlier in this post, as far as I am aware no such deals have been announced and this may or may not be the case.

I would say maybe speak to a broker and see what suggestions they have for you in terms of what options there are.. 95% deals on pre-owed houses are few and far between as I have been looking myself, but with 10% you will have more options.

You need to do what is right for you and not worry too much about missing the boat based on hearsay, better to have enough money behind you and get the house you want, than to rush and then find you're struggling.

Good luck

Jana83

Many thanks for your kind words TMC35 - it makes a nice change!

As previously mentioned, my BF DID have missed / late payments on his loans and c/cards but they are ALL paid off now & the accounts are now closed. The new c/card he has is just for rebuilding his credit score - as recommended by MSE - and is paid off in FULL every month. The loan (my suggestion I admit) was a) very small, b) totally necessary and c) it gave us an idea of how he's regarded financially - or so we thought!. Believe me however, we won't make the same mistake again!

Like the title of my post suggests, we just wanted to know if we are heading in the right direction or are we just wishing for the impossible? As a wannabe FTB, it's very difficult knowing that you're throwing money at someone else's mortgage, and not getting anything to show for it at the end!