Pay off debts vs Better LTV?

Undercovercarrot

Hi there.

Quick question. We are looking to buy a house worth around £168,000. We are funding the deposit via the sale of our current house (£17,000) and parents are giving us £10k, giving us an LTV of around 84%.

We have in the region of £15000 unsecured debt (mainly on credit cards...yes, I know!) Other than that, our only other debt is a PCP on a car which is £397pcm, and a loan that we will be paying off in the next few days.

Our mortgage broker (L&C) said they felt we had no real problem with our lending criteria, as our LTV was (relatively) low and our debts were not extreme at all. However, our current deal is with Nationwide. For curiosity, I went onto their site to see if I could get an agreement in principle from them, and we were declined! Reading around this site, it seems they are a bit anal when it comes to outstanding credit reports.

We have no massive loyalty to Nationwide (good thing really!) but obviously we are a little concerned about being declined. So, my question is this: would it be better to up our LTV to around 90%, using the residual to pay off some debts (so roughly £10000) or would it be better to stick with the deposit we have?

BTW: both our credit reports show green for payments in last 12 months and good scores through the usual suspects.

Wozza85

Very good question as I've seen many people say pay off debts on here then try and save again for the deposit!

It probably looks better if you have less debts to be honest IMO

Thrugelmir

With that level of debt you will struggle to obtain a mortgage. You need to pay down the debt then get saving. From a lenders point of view the deposit is borrowed. The fact that the remainder is being gifted gives the lender no comfort. As currently you do not appear to be managing your finances very well.

Undercovercarrot

Thrugelmir wrote: »

With that level of debt you will struggle to obtain a mortgage. You need to pay down the debt then get saving. From a lenders point of view the deposit is borrowed. The fact that the remainder is being gifted gives the lender no comfort. As currently you do not appear to be managing your finances very well.

How can it be borrowed? £17,000 is the equity from our current house. We can prove that as well. Also the debt is mainly 0% credit cards, rather than anything else.

Wh05apk

Thrugelmir wrote: »

With that level of debt you will struggle to obtain a mortgage. You need to pay down the debt then get saving. From a lenders point of view the deposit is borrowed. The fact that the remainder is being gifted gives the lender no comfort. As currently you do not appear to be managing your finances very well.

How can you say that?


You know nothing about the application, has it been declined on affordability (no idea, we don't know if they earn £30,000 jointly or £300,000) or adverse credit (the op mentions all commitments green for the last 12 months, but what about before that?)


Nationwide are no worse than other lenders with regards debts (better than some) you need to find out the reason for the decline, I assume after speaking to L&C you then did the AIP direct?

Undercovercarrot

Wh05apk wrote: »

How can you say that?


You know nothing about the application, has it been declined on affordability (no idea, we don't know if they earn £30,000 jointly or £300,000) or adverse credit (the op mentions all commitments green for the last 12 months, but what about before that?)


Nationwide are no worse than other lenders with regards debts (better than some) you need to find out the reason for the decline, I assume after speaking to L&C you then did the AIP direct?

Hi

Yes, did the AIP via L&C and also got one through Natwest (a "soft" search, but with all debts declared) and they were happy. In answer to the prior to 12 months, I have 2 missed payments that were repaid the following month due to an error with DD's when I changed accounts - my fault, not the bank's, but this was over 2 years ago.

Joint income is £60,000 give or take a penny!

Undercovercarrot

The result was....

Mortgage approved! AIP in my hand from Santander for 2.89% 2 year fixed!

Phew!

brenda10

Undercovercarrot wrote: »

The result was....

Mortgage approved! AIP in my hand from Santander for 2.89% 2 year fixed!

Phew!

Its just I earn about 30k year, asked L&C for rough estimate of money I could borrow, they say with no debts other than 100£ mth student loan I could get 135k-145k(estimate). I don't know if I should go with L&C, I have Nationwide flex direct accounts and isas x2 totalling 13k and parents going to give me 32k on loan(interest free)and NWide say they cannot lend!!!!

Anyone used L&C, all info appreciated

Undercovercarrot

I think a potential problem with nationwide is that they get quite nervous if they can't see exactly will the deposit is coming from. This includes gifts. Perversely, the fact that you have a nationwide flex account may actually count against you! This is because they know your financial history over the last few years, and they may get suspicious about a sudden gift from a parent.