Credit Card Balances and Mortgage Applications

Mrsbear

So you're looking to borrow 5.6 times your combined salary?

I would have thought affordability will be an issue with a partially gifted deposit, high LTV, massive income multiple and debts.

We earn about the same and I'm worried about taking on a £250k mortgage with a 20% deposit and no dependants.

Macboero

Don't forget the Government Help-to-Buy scheme.

Mrsbear

I leave others to provide more knowledge advice but if you are putting 75% LTV into mortgage calculators, I'm pretty sure it will be allowing you to borrow much more than 95% and I've heard you have to be pretty squeaky clean to get HTB.

I'm really shocked that people are stretching themselves this far on HTB. we earn the same and I wouldn't even entertain such a big commitment.

kingstreet

HTB - Mortgage Guarantee is a 95% mortgage and the affordability rate used is higher than that for a lower LTV product, so you'll find a lower maximum loan via this route.

The 75% only comes into play if a newbuild is being purchased and the HTB - Equity Loan scheme is being used.

Mrsbear

Sorry- I didn't mean to confuse the issue but I assumed it was the 75% option as the OP only mentioned HTB when I asked if they wanted to borrow 5.6 times their income and I assumed they meant they'd be borrowing a lower income multiple under HTB.

kingstreet

Affordability is tighter on HTB - Mortgage Guarantee, so if a borrower thinks they'll get a bigger mortgage than usual by using the scheme, they are in for a surprise.

As I said, if anything, they'll be able to borrow less as the Government is tight on issues like credit worthiness and affordability, in return for the guarantee fund it is underwriting if the lender contributions cannot meet the fund's liabilities.

HTB - Mortgage Guarantee is designed to increase the amount of 95% lending available in the market by giving lenders relaxed capital rules and the guarantee fund. If you qualify for a 95% mortgage now, you could have got one from the 13 or so lenders offering such products prior to October.

Thrugelmir

Macboero wrote: »

We believe we will be able to get to that within the time scales, but not if we pay down the credit cards. Ironically, paying down the credit cards is projected to be easier afterwards, as the predicted monthly payments on the mortgage we are looking at are significantly less that the rent we are paying now, but isn't always the way?

You are looking at the matter from your perspective. Whereas lenders take a totally different view of the situation. Quantifying the risk is the name of the game. Of which badly managed personal finances is one factor that the mortgage application process highlights.