FTB Mortgage AIP and old debt

libby3589

Hi all,
My partner and I are trying to buy our first home but we think we've hit a brick wall.
Over 7 years ago my partner had defaults placed on some debts he'd racked up as a teenager. The debts are now with a debt management company and are slowly being paid off. The default dropped off early last year as 6 years had passed and everyone we asked said it would no longer affect a mortgage application. We had an instant AIP (even the broker was shocked how fast it happened) and placed an offer on a house. We only require a 75% LTV mortgage but we're now concerned this old debt is going to come back and bite us in the !!!. During the application process, which I did, I was asked if there were any current finance plans or loans we were paying. My mind automatically went to current bank loans or finance of which we have none. I totally forgot the monthly payments he makes through the debt management company would count. Are we likely to fail the application and have to pay off all the debt before we can apply for another mortgage? Or are they likely to assess his current situation, see that his credit score has increased dramatically over the past few years and possibly accept it? Praying for the latter!

Thrugelmir

Why are you stretching out repayment of the DMP?

Just because the defaults have disappeared doesn't remedy your partners credit profile from a lenders perspective.

Did you disclose the DMP on the mortgage application form?

libby3589

Because we were told the debts made zero difference on any future applications etc it was pointless whacking money into it when that money could go towards the house. it would just put us back on buying by like 5 years or something.

nope, after 6 years you no longer have to disclose defaults so it never crossed our minds. carelessness on our part for forgetting about it I guess! his credit score is now 950 showing no owing credit. but the accounts are still technically open and we've been silly enough to approach the same lender for a mortgage that the debts are with!

Thrugelmir

libby3589 wrote: »

Because we were told the debts made zero difference on any future applications etc it was pointless whacking money into it when that money could go towards the house. it would just put us back on buying by like 5 years or something.

Who told you that?

libby3589

We asked several people at the time. Experian etc, the debt management people themselves and an IFA when we were going to buy a house last year (again accepted v quickly for AIP but we back out because payments were too high at the time). All said it would be absolutely fine and not to worry. As the DMP is 0% interest it's not costing any money, just being paid gradually.

Thrugelmir

libby3589 wrote: »

As the DMP is 0% interest it's not costing any money, just being paid gradually.

If it were that beneficial then everybody would roll their debts up into a DMP. Unfortunately there's a downside. Post the financial crash the world has changed. Mainstream lenders are far more picky preferring to lend to the best risks.

Did you check all the CRA's to see if there was no evidence of the DMP?

libby3589

Literally checked all of them. Nothing on there about it which is good and his bank is often offering loans, overdrafts and cc's to which he always says no. What do you think then. I don't have any more info to give. Do you think they'll decline it?

nottoolate

libby3589 wrote: »

Literally checked all of them. Nothing on there about it which is good

if all the accounts in the dmp were defaulted and have now dropped off then there wont be any sign of the dmps existence on credit reports.

Thrugelmir

nottoolate wrote: »

if all the accounts in the dmp were defaulted and have now dropped off then there wont be any sign of the dmps existence on credit reports.

This would make CRA reports worthless to a financial institution. As the debt still exists even if the default doesn't.

This may be the real issue though.

we've been silly enough to approach the same lender for a mortgage that the debts are with!

As may result in an updated record.

nottoolate

Thrugelmir wrote: »

This would make CRA reports worthless to a financial institution. As the debt still exists even if the default doesn't.

it is true though. there will be no sign of the dmp on the cras

as you say though, if the lender has their own records they will know from that

libby3589

How about applying to other lenders? I'm so sick with worry over this. It's going to put our life plans back so far if we have to pay all this debt off before buying. Are they likely to see a big fat no from one lender and all follow suit?