Is property developing possible with bad credit rating?

Shinedog12

Hi,

My husband and I have a terrible credit history, although, due to redundancy payout, we have managed to clear all our debt now, with £40k available for a deposit. The last default on our record was over 2 years ago. We were with a DMP for the last 5 years and kept up all payments. Defaults occurred due to debts being sold to different companies and general breakdown in communications between creditors and Step-change.

We had a chat with a mortgage advisor and we were told that we could only get a mortgage with a ridiculously high rate and a 30% deposit.

Ideally, what we'd like to do is buy a property cheap at an auction, do it up and sell it on, but are we realistically going to be able to get a 'tailor-made' mortgage to suit? One which we won't get financially punished for not staying with it long term and that will acceptable at an auction.

I would appreciate any advise please.

ACG

When did the DMP finish?

Thrugelmir

What's a ridiculously high interest rate ?

Annisele

Shinedog12 wrote: »

Ideally, what we'd like to do is buy a property cheap at an auction, do it up and sell it on, but are we realistically going to be able to get a 'tailor-made' mortgage to suit? One which we won't get financially punished for not staying with it long term and that will acceptable at an auction.

If you need a mortgage at all, then buying at auction is a risky route.

If you want to be sure you can get mortgage finance on a particular property, then you'll need to pay for the survey/legals before the auction - and run the risk that somebody will outbid you and you'll have wasted your money.

The alternative - not paying for survey/legals beforehand - leaves you open to the risk of committing to buy a property that's unmortgageable. In that case you'd likely lose your deposit as a minimum.

Shinedog12

The DMP finished in April this year......well, that's when we cleared our debt by offering full and final settlements. Some of the debts are showing as partially satisfied.

We weren't actually given a figure for the rates, just informed that they were ridiculously high!

GMS

You have failed to repay debts contractually or in full. From a lender point of view you are not a great risk.

You should be more concerned with getting a mortgage than getting a great rate.

Shinedog12

Annisele wrote: »

If you need a mortgage at all, then buying at auction is a risky route.

If you want to be sure you can get mortgage finance on a particular property, then you'll need to pay for the survey/legals before the auction - and run the risk that somebody will outbid you and you'll have wasted your money.

The alternative - not paying for survey/legals beforehand - leaves you open to the risk of committing to buy a property that's unmortgageable. In that case you'd likely lose your deposit as a minimum.

Hmm, avoiding auctions is probably wise. We would still like to get a cheap fixer-upper (not at auction) where we can hopefully get a quick turn-around and not be tied to a mortgage for x amount of years.

ACG

30% would be needed i think.
I would expect rates to be 6-7% at best for the first year or 2.

Theyre obviously not great rates, but taking into account how recent the DMP is, theyre not that bad.

Shinedog12

GMS wrote: »

You have failed to repay debts contractually or in full. From a lender point of view you are not a great risk.

You should be more concerned with getting a mortgage than getting a great rate.

Yes, from a lenders point of view we pretty much should be avoided! What would you recommend? Rent until time eventually heals?

Thrugelmir

Shinedog12 wrote: »

The DMP finished in April this year......well, that's when we cleared our debt by offering full and final settlements. Some of the debts are showing as partially satisfied.

That's the downside of F&F settlements. Financial institutions aren't going to be keen to conduct business with you. A fact of life, commercial reality, nothing personal. The concern would be that you would have no hesitation in doing the same again.

GMS

Shinedog12 wrote: »

Yes, from a lenders point of view we pretty much should be avoided! What would you recommend? Rent until time eventually heals?

Its up to you what you do. Either you take what is available and swallow the rate or wait until such time as your credit file is better.

Property development is difficult and needs access to all avenues of finance. Homes Under the Hammer et al do not show the background to financing and issues arising.

Are you back to work following redundancy? If so for how long? Many lenders would want to see a minimum period of employment.

If you intend to refurb and sell then look at fees to repay early. Look at overall financing costs. Bridging finance could be an option but would be much more expensive than a 'high rate' mortgage.

Not something to dive in to.