First time buyer; bad credit, big deposit

nejeroom

Hey,

so - I have been working full time since i was 17. When I turned 18 I was silly and took out quite a lot of credit. I usually manage to pay everything off (with about £600.00 per month to myself) however, o2 & dorothy perkins both issued defaults against me for miniscule amounts. I'm talking £25.00 and £5.00.

so anyway - my credit is bad, my fiance's is great...we are buying a house from my mum - worth £180,000, she is deducting £20,000, our deposit is £50,000 but we're taking an extra £20,000 to pay off debts etc.

My question is, will we get a mortgage? we want to borrow the extra money to pay everything off. So all we have debt wise is our car insurance monthly payments...we do have the money spare each month to pay a mortgage but it would be tight...would the company take into consideration our intention to pay everything off and give us a mortgage?

Thanks

monty-doggy

How long ago was your bad credits?

BitterAndTwisted

What mortgage-lenders take into account is the age of those defaults and the level of your current borrowing.

Saying that you intend to extend your mortgage borrowing to pay off current debts does not guarantee that you will pay them off if they agree to lend. The maxim that "you cannot borrow your way out of debt" is not just a vague and unsubstantiated rumour but a fact

grifferz

nejeroom wrote: »

Hey,

so - I have been working full time since i was 17. When I turned 18 I was silly and took out quite a lot of credit. I usually manage to pay everything off (with about £600.00 per month to myself) however, o2 & dorothy perkins both issued defaults against me for miniscule amounts. I'm talking £25.00 and £5.00.

How old are you now? Do the defaults still appear on your credit report?

nejeroom wrote: »

so anyway - my credit is bad, my fiance's is great...we are buying a house from my mum - worth £180,000, she is deducting £20,000, our deposit is £50,000 but we're taking an extra £20,000 to pay off debts etc.

So is that £50k of deposit on a purchase price of £180k, mortgage required for £130k?

What is your joint income?

Nice LTV of 72%, but lenders may still not like seeing any defaults.

nejeroom wrote: »

would the company take into consideration our intention to pay everything off and give us a mortgage?

They're going to like your deposit. They're not going to like:

• Any defaults
• Your loan payments for the loan that clears your debts. But they may prefer to see that than the debts so it may still be the right thing to do.

They'll also take into account general affordability, i.e. what is the repayment going to be like versus income, taking into account loan repayments.

Thrugelmir

Where's the £50k deposit coming from if you have £20k of debts?

What does the debt consist of, 0% credit cards, overdrafts, HP for car finance?

mildredalien

I think any loan you want to pay off debts has to be separate from your mortgage lending. If you have £50k deposit and your house is valued at £160k, they would lend you £110k and no more than that.

£20k debt is still a substantial amount, it may be better to pay that off first using your deposit funds and then go into mortgage hunting with a clean slate. Otherwise you may not meet affordability criteria if the bank think you have lots of other debts to service.