Gifted Deposit. will it help...bad credit.

James1980

Hi All,

Just wondering if anyone has any advice.

been given £10,000 by a family member for a deposit for a house.

we are looking at a property for £50,000 so therefore we would be paying 20% deposit.

£40,000 left to pay.

we do have a Unsecure Loan with our bank, and 2 credit cards, which we use for shopping etc each week, so decent sized payments are made to them each month.

The mortgage amount that we would be paying over 20-30 years would be £100 less per month than the rent we are paying each month now.

Only issue is my wife was recently declined for a Tesco Credit Card.
Stating she had too much credit when they sent out the forms to confirm decline.

Would this straight away rule out us for getting a mortgage with our bank who we have banked with for 12 years?

Any advise would be great.

(also we have all money ready for fee's required for a mortgage etc so, needing additional to cover these costs is not a problem)


Thanks
James

AliceBanned

Depends how much debt you have overall. Potential lenders calculate affordability based on your existing outgoings - including credit card repayments each month.

Other people on here can probably advise better but will need to know how much debt you both currently have. Based on the deposit and buying cost alone I doubt you'd have a problem getting a mortgage, if you both have regular incomes to cover the mortgage.

AliceBanned

Just had an afterthought - not sure how happy most lenders are with a totally gifted deposit - they want to see you have done some saving too as this would make you less of a risk. I have a £3k gifted deposit towards a similar purchase price at the moment - but they are asking me for a 15% deposit of my own on top. Sorry I may have mislead in previous post.

ACG

What bad credit do you have?
Loads of credit isnt bad credit as such, bad credit is missed/late payments etc.

Lenders will accept gifted deposits but not always 100% with them, they usually want to see you had saved up something.

Why have you got so much debt?
Pay it off/down. Saying you will be £100 a month better off on a mortgage isnt really the answer as rates are at an all time low, so you can guarantee theyre going to go up at some point eating away at that £100.

James1980

Hi Alice, Thanks for the advice.

i guess a £3k gifted deposit that you have on similar purchase price though is still below the usual preferred 10% minimum that most places want these days which maybe why they want more.

I was just thinking how do they work out your affordability

say for example you have a Credit Card @ £5000... and say the minimum payment is £200.. do they use Minimum payment as your affordability figure. Or do they use the actual amount you are paying to it each month, which could be £500.

James1980

ACG,

it actually said on the letter "because you have a high level of borrowings" was the reason for the credit card to not be accepted.

and actually no.. there is no BAD credit then at all. it is just a high level of borrowings.

we've a loan with our bank around £9000 to pay on that over the next 4 years. obviously never missed a payment on that and had loans with them before, never a payment missed.

a credit card which is close to £5000 which may have been over its credit limit by about £20 a few months back for 1 month only and was back under its limit quickly after, but we occurred a £12 fee for that , this credit card we are working on at the minute and paying £500-800 off it per month since last month. So Credit and payment is good.

we have a £1000 credit card with our bank but the balance on it at the moment is ZERO.

we do sit in our arranged overdraft alot which i guess can cause problems.

roughly we are not on high salary combined would be £30-35k a year.

ACG

Im not very god at beating around the bush, but i mean this in a helpful way...

You have £14,000 worth of debt and your living in an overdraft.
Would you lend someone money if you could see that? A bank doesnt know you (even if its your local bank), so they do not take into account your personality etc its based on your credit worthiness and at the minute in the eyes of the lender your living beyond your means.

Forget the credit card, its viewed differently than a mortgage as its an unsecured debt.

Close the credit card if your not going to use it, get out of your overdraft and get the balances paid down. It might take you a while but you will have a gifted deposit so its not like you have to spend time saving that up.

Alternatively use the deposit to clear the debts and then your monthly repayments can be put towards your deposit, you could have it saved up in a year.

James1980

i seen some of your other posts, i know you like to get to the point

so basically at the moment we would be wasting our time even looking at a property or considering a mortgage even though we've a deposit and any fees ready to pay?

Totally understand what you mean, they dont know us personally so know nothing.. where as we know mortgage would not be an issue, even especially when already paying more in rent (i realise it goes up and down with interest rates)

Is there any proper affordability calculators about online so I could put all the facts in figures in to gauge what our affordability would be like.. on doing some of the general mortgage calculators and using minimum payments for credit cards/store cards that they recommend, seems to indicate we could afford over 100k mortgage with our income and outgoings.. i obviously not looking anything anywhere near that as can see from OP.

Dave_Ham

I think what is being driven at is the difference between can I get a mortgage and should I get a mortgage.

I have little doubt from what you have said that I could get you a mortgage, what ACG is referring to is perhaps is it good advice for you to be buying at this time of your lives.

Having a loan and a card is not a disaster, but combined with constant use of overdraft suggests you are/have lived beyond your means and therefore with cracking that cycle is a mortgage a burden too far...

All the best

James1980

So out of the authorised OD would be a starting point then?

I realise mortgage payments go up and down in regards to interest.

With having maybe high credit but not bad credit and already paying near 400 on a rental property a month.

a 40k mortgage after the deposit paid, now looking at it again my £100 info was wrong.. It could be £200 or more less per month initially for a mortgage especially if taken for 25-30 years. with the mortgage only being £40k would of preferred shorter but would assume bank may prefer the mortgage over a longer period with if we have high credit at the moment.

Is there any other options available at this time if we would definitely be unable to get a mortgage ourselves with the information provided.

Guarantor or anything? or what if another family member upped the deposit to 40% deposit.

ACG

Most have affordability calculators, take a look on the banks websites. The problem with them though is they will not be using a real person to underwrite the case it will just be does affordability fit.

Dave has said he could probably get you a mortgage (he has more experience than me), i think i could get you one too, but it wouldnt be on great rates and you have said getting a mortgage will save you £100 a month, im presuming your looking at better rates than i think is possible.

The main thing i think is getting out of the overdraft, once thats done and has been out of it for 3-6 months it will make getting a mortgage a whole lot easier but again with the level of debt you need to question if this is something that can be resolved or if your going to live like that.

If buying a house isnt spurring you on to clear the debt asap, then once youve got the house your more likely to think we will clear it as we go, but then something will pop up - car needs fixing, boiler needs replacing and all of a sudden your back to square one.