Re-entering the mortgage market

Silver_Starfish

Hi there, we had a few really good years in which we were able to pay off our previous mortgage and move into a nice bigger house, paying cash for the balance. We have spent the past 3 years in an ultimately fruitless attempt to launch a business. This has used all of our savings and left us with overdraft and credit card debts of some £30k. We would like to take out a mortgage of about £40k to clear this and enable us to do a bit of work around the house. Our house is worth about £325, so we are only looking for a mortgage of around 12%.

I don't currently have a job, I'm hoping to find one, it is likely to pay around £20k if I succeed. My wife has a temporary job, she is hoping this will be replaced with a permanent job quite soon. Having always paid our council tax in good time until a few months ago, we are now behind (one of the reasons I haven't paid it is I am still hoping that we will get some help with it, and we are appealing their assessment) Up until today I thought nothing of that, but someone told my wife that these are the sort of things that they look at now when deciding whether to grant a mortgage request. Does anyone have any insight about this? Is this something that all lenders do, or just some? Have I already messed it up, or can I pay the arrears and undo the damage?

The problems arose as I was trying to get a business off the ground. Having moved on from this and (hopefully) returned to a position of stability, might they accept that these were exceptional circumstances, and that I am generally a good bet. Its not as if they are taking any risk at all given the low loan to value ratio I'm looking for. Might my previous excellent record go in our favour?

Just to complete the picture, we are both 49, but we kept up the payments on the endowment policy we had on our previous mortgage, so that would cover off that side of things, therefore we would be looking at an interest only mortgage. We also have two teenage children, so I am a little concerned about what an affordability study would throw up. Its likely that we will both need a job to be able to demonstrate that we can make ends meet. (do they take tax credits etc into consideration?)

Sorry for such a lengthy post, any advice would be gratefully received. Many thanks.

Thrugelmir

In summary you are asset rich but cash poor. From a lenders perspective you are in essence asking them to bail you out from a difficult situation. Which more than likely is going to be a decline. The starting point I would suggest is for you to a get a job of any description to at least maintain the status quo.

Would realising the endowment policy clear your debts?

Silver_Starfish

Thanks for the reply Thrugalmir. Cashing in the endowment would only bring about £12k at this stage, which would help, but not resolve the situation, so isn't the route I want to go down if possible. It has critical illness cover and given the stress of the past few months it would seem sensible to retain that! :eek:
I'm not expecting to get a mortgage until one or both of us are employed. The question is how much damage if any has been done by the Council Tax situation for when I do come to apply? Also while I'm asking questions, how soon into employment would they normally grant a mortgage?

amnblog

No job = No income = No mortgage

Keekles

If you're in arrears it's not the be-all and end-all but you may restrict access to some lenders. It also depends on the amount etc. so to be honest; if I were in your shoes, I'd be getting myself a (permanent) job sooner rather than later and explaining the situation to a broker.

New jobs are acceptable with some lenders (more of a grey area around probation periods etc.) but no one on the forum can guide you other than to suggest you see a broker.. once you have a job.

ACG

Council tax does not show as a credit commitment on your credit report so should not be a deal breaker - however if you get an underwriter who looks through your statements and sees no council tax payments, they may question it.

CHOOSING to not pay a bill in order to get help with it... how would you view that if you were an underwriter? What happens if you want help with your mortgage?

Mortgage_Mark_2

Equity doesn't pay a mortgage, income does.

As amnblog says, no job = no mortgage.

Silver_Starfish

Thanks for the advice all, much appreciated. I'm fully aware that I won't get a mortgage without a job and that's what I'm working on. Cheers