Will this affect my chances of getting a mortgage?

notmyrealusername

Background:

IVA completed early by way of F&F in 2009, completely off credit report since 2012 and have been accepted for mainstream credit since eg John Lewis credit card and Tesco credit card.

No debts (but see below!)
30k salary - same employment for 8 years
On electoral roll at same address for 5 years
Price of property £80,000 (50% share)
Deposit £8000

My only option for purchasing a house is shared ownership, I know all about the pros and cons but it really is a choice between shared ownership and renting as my 30k salary would not support a mortgage on a regular property (160k).

I've seen a property that is almost perfect but here's the snag... up until a few weeks ago I had zero debt, always paid my credit cards off in full every month without fail. In recent weeks I have had to pay an £8000 bill on my credit cards meaning they are virtually maxed out. This should be covered by insurance so I anticipate being reimbursed in the next few weeks.

Would being maxed out on my credit cards (and taking out the Tesco card recently) impact on a mortgage application? I can pay the cards off with my deposit money if the insurance doesn't settle before the credit card bills come in to ensure I don't pay interest but then I have no deposit until the insurance reimburses me!

Even if I paid them off would they still show on the report as maxed out until the next 'input' of data from the credit card companies?

Thanks for any input

kingstreet

Most lenders won't have a problem if you tick the box indicating the card debt will be cleared on, or before completion.

It may be a good idea to avoid lenders such as YBS and Santander who may have an issue with that.

Try to avoid lenders who will decline you for a historic IVA too.

Dave_Ham

The IVA is likely to be a bigger barrier than the credit cards, which will be paid off before completion.

There are not many lenders that are happy with an ex IVA at 90% (assuming you answer the questions honestly of course)

Your salary would allow a purchase in and around £160k, subject to you being able to raise a 10% deposit.

Good luck

notmyrealusername

Thanks both, the two posters who I was hoping would answer have done so!

kingstreet wrote: »

Most lenders won't have a problem if you tick the box indicating the card debt will be cleared on, or before completion.

It may be a good idea to avoid lenders such as YBS and Santander who may have an issue with that.

Try to avoid lenders who will decline you for a historic IVA too.

Hmmn, if YBS and Santander might have an issue with it then I guess that limits my choices somewhat as I know there's not that many shared ownership mortgage providers available, especially if you add in to the mix that some might do shared ownership but won't do ex-IVA>

Dave_Ham wrote: »

The IVA is likely to be a bigger barrier than the credit cards, which will be paid off before completion.

There are not many lenders that are happy with an ex IVA at 90% (assuming you answer the questions honestly of course)

Your salary would allow a purchase in and around £160k, subject to you being able to raise a 10% deposit.

Good luck

I had been in contact with a broker a few months ago who specialises in ex-IVA and they seemed pretty confident of there being a high street solution at 10% deposit with shared ownership.

The IVA started in 2006, was completed in 2009 and came off my credit report in 2012. Since 2009 I've had a Vanquis card which lead on to Creation cards and finally John Lewis (HSBC) and Tesco - all paid off in full every single month, I've never carried a balance over. So I have positive history going back to 2009 along with mobile phone, car HP going back further (pre-IVA) that I never missed a payment on. I do appreciate that even though my credit report is unblemished I will have to answer 'yes' to that all important Q of have you ever been in an arrangement with your creditors

I wouldn't be comfortable with getting a 4.8 multiple mortgage to go for a 'regular' property at 160k - too much to go wrong if interest rates rise which I'm sure they will in time. Not only that I'm not sure given the previous IVA that I would ever get such a mortgage. Hence why shared ownership is most definitely the way forwards for me.

Dave_Ham

Understand entirely and aim to please...

You may find depending upon the rent component and your age (as this can affect mortgage term) that the monthly cost may not be far out if at all.

There will potentially be solutions depending upon the type of shared ownership, although not an easy process finding the best one.

Good luck

notmyrealusername

A mortgage @ 5% over 30 years on a 160k property with 10% deposit would be £780 a month, however at 12% it would be £1489!!!

A mortgage @ 5% over 30 years on an 80k shared ownership (50% of 160k)with a 10% deposit would be £390, at 12% it would be £744.

I believe the rent element would be around £150 (based on another property on RM of a similar value) so overall I'd be looking at £540 a month shared ownership and £780 full ownership.

Dave_Ham

You cannot apply a 12% rate as part of any ongoing consideration (queue the mud slingers)

You can fix for 5 years and then your income/situation may be different, so not like for like consideration in any case.

My other consideration was around term, as potentially over a longer term the costs would be close. £150 seems reasonable on these numbers mind you...

notmyrealusername

I see what you're saying but since my previous financial difficulties I am very risk averse, I've been debt free since 2009 and am so careful with money it's verging on OCD! I got the 12% rate from the BBC mortgage calculator which gives the figure at the % you asked for then says 'beware, at 12% it would be...'.

I just feel that as a single person my 30k (more like 28k basic but get non guaranteed overtime so have earnt 30k every year) couldn't sustain a 4.8 salary multiple comfortably.

Dave_Ham

I understand entirely, was merely putting out there that is what achievable rather than the right thing to do.

You are attacking it prudently, just ensure you understand the Shared Ownership side from rent now, potential rent in the future, the impact of moving/selling the property and any other details relevant to you.

All the best

notmyrealusername

Dave_Ham wrote: »

I understand entirely, was merely putting out there that is what achievable rather than the right thing to do.

You are attacking it prudently, just ensure you understand the Shared Ownership side from rent now, potential rent in the future, the impact of moving/selling the property and any other details relevant to you.

All the best

In my area shared ownerships generally go STC on rightmove within days, some even appear on RM already marked as STC! Many properties even have a 'premium' (sometimes as much as 20k) for supposed improvements that have been made but which can't be added to the mortgage and they still sell within days so I don't think resale would be an issue. Added to that it would be a very long term move for me, maybe even for the rest of my life.

Dave_Ham

Good stuff, clearly you have thought it through and are happy..

Best of luck with the mortgage