Mortgage impossible?

Rams18

Hello,

I am looking for advice on my current situation.

I live with my partner in a rented house currently paying £650 in rent. My partner has a mortgage on a property with equity of around 18k possibly a touch more. This property is currently rented out covering costs.

We both have an income each, 26k for myself and 27k for my partner. The problem lies in our credit card debts. My partner has debts of 25k and me of 6k. We recognise that this is a problem. We are paying them off but very slowly.

We can't go back to my partners property as location of job will not allow, hence the rented property.

We realise we have made mistakes in terms of financial decisions in the past.

Would a new mortgage be impossible? We would be looking at a new property of around 120k. The frustration is that our incomes are good but our debts probably make it difficult or impossible to borrow.

One possible solution I thought of could be that we try and save for a deposit and probably get help and get a mortgage in my name?

Many thanks in advance.

ACG

In theory your incomes support it.

But would it not be better to sell the house, wipe out £15k of your debt (after expenses), which in turn will allow you to save up quicker as your repayments will be less?

Rams18

Thanks for the speedy response.

Yes, I think selling the property is the best solution and therefore almost starting again. We had hoped to be able to afford something in the near future and the likelihood of us saving up enough seems impossible. At 28, and 30 years old we wanted to move quickly.

It seems frustrating that we are throwing away 650 a month in rent that could come off our debts or ideally go towards our own mortgage.

I really feel trapped in the current situation and suppose am just looking at any options available.

ACG

On £2.5k a month combined income (just a basic calculation), you could be ready to go within 12 months.

Even if you sold your house and just reduced the debt with the equity but saved up instead of actively paying off the rest of the debt it would put you in a much better position. Your incomes support the mortgage and debt, lenders just dont like to see a lot of debt with (presumably) a 10% deposit.

kingstreet

With that level of debt, the output from a lender's affordability calculator is £96,000.

You'll therefore need to save £24k if you want to buy for £120k. More if you have dependents, maintenance or childcare costs.

Rams18

Thank you.

You have given me a bit of hope. It's easy to get down about these things. Apart from selling the house, i wondered what your opinion is on these save to buy schemes I've seen advertised? I know that there can be benefits with these schemes but wondered if perhaps we should just open a normal savings account. I think if I felt we were making contributions towards saving, however small, it would be a positive start. Perhaps I'm being silly as I suppose we should pay off debts first.

If we sold the house and reduced my partners debts to 10k would we still struggle to get a mortgage if I also still had my 6k debt? My income will increase by around a £100 pound a month in September so that can go towards saving too.

I just don't want to be sat in the same position as now next year. I need to decide which steps to take first.

Rams18

We have no dependants. It would be impossible to save 24k in the near future and if we did we would surely be better paying off most of the debt?

Thrugelmir

First priority has to be to tackle your debt. By selling the property. This will result in repayments clearing more capital by paying less interest. There's no easy answers in situations like this.

Rams18

I know there are no easy solutions but there has to be a solution. I had wondered whether, if my partner sells, pays off some debt and we use some of that as a deposit for a mortgage in my name then we would be able to move a little quicker. With reduced debt and interest to pay we could look to pay his debt off and my debt off as quickly as possible and be on the road to financial recovery?
In the meantime I could save what I can and pay off some of my debt.

kingstreet

Rams18 wrote: »

We have no dependants. It would be impossible to save 24k in the near future and if we did we would surely be better paying off most of the debt?

If a lender is willing to advance £96,000 you NEED to raise £24k if you want to buy a property you mention at £120k.

There are various combinations possible which involve more deposit and less debt.

How you achieve that is up to you.

Here's a link to the Halifax affordability calculator as an example. Play around with various amounts of debt, term etc and see what the output might be;-

http://www.halifax-intermediaries.co.uk/tools_and_calculators/mortgage_affordability_calculator/default.aspx

remembering to add your deposit to the maximum mortgage to find your maximum purchase price.

dimbo61

You need to have a look on the debt free board and watch SuperScrimpers on Channel 4
Sell your partners property and pay off the most expensive debt first.
You have to look at why you both have the debts you have?
Shop at ALDI not M&S, cook food at home not take-a-ways.
Dump the Iphone, Sky and even look at a cheaper flat ( if possible)
Give yourself one year to clear all debts and one year to raise a deposit.
Easy for me to say much harder to do.
Live the MSE life style