95% ltv question

tomcc1

Hi there,

I am looking to buy my first house with my wife in a few months time and we are hoping to get a 95% ltv mortgage on a house worth around £300k

I am a 40% shareholder in a business which is doing well with consistent turnover. I have been a director for 2 years, company is 5 years old. I take about £86k in salary and dividends per year.

My wife is a teacher on just over £40k per year - perfect credit score. We have very little debt, just a personal loan each costing about £200 per month.

Question is that there is nothing major on my credit file but 2 or 3 late payments - what do we think our chances are like?

I'd be really grateful for some advice!

Cheers,

Tom

Thrugelmir

With so little savings. A lender may wonder as the lavishness of your lifestyle.

Turnover of a business is a meaningless figure in many regards. As the old saying goes Turnover is Vanity, Profit is Sanity but Cash is King.

suse*

As you're a director your best bet is talking to some brokers and see if they can find any specialist deals for you. It also depends on the new mmr rules and what your other debts / expenses are like eg kids, as to if they think you're a good enough risk to lend to now.

tomcc1

Hi,

Thanks for the reply. I mention turnover as I believe lenders want to see consistent dividends and consistent turnover as a measure of stability. Perhaps I am wrong? Obviously I know our profit, which is very healthy too (can't take dividends without profit!)

As to why we have a small deposit, we've just paid for our wedding. We currently save about £2500 per month, so hopefully our bank statements would prove we don't have a lavish lifestyle?

I reiterate the question though, what are the thoughts on the effect of my credit history?

Thanks,

Tom

tomcc1

Thanks for your reply too. No kids, and only one loan each. We currently pay £1350 rent plus bills etc.

Cat2011

Santander weren't concerned by 3 late payments on my credit record.

It's concerning that you only have a 5% deposit and have borrowed money on an income of £125,000. You might want to review your spending levels, they seem huge.

With savings of 2.5k a month, just wait another year and buy then at 85% LTV. It'll be a much better rate.

tomcc1

So are we saying that we'd be penalised for having a high income but pursuing a low deposit mortgage? Our spending isn't very high really, when you consider we take home around £7000 per month between us, roughly £2100 goes on rent/bills etc, around £400 on food, £2500 on savings, around £400 per month running cars and another £400 on loan payments, we're only left with around £1200 between us for everything else. I had hoped that these numbers would illustrate an excellent affordability?

We did have nearly £30k saved but we paid for our wedding and so we're in the process of replenishing our savings. We just feel we'd like to buy a house sooner rather than later having paid for our wedding. The loans, unfortunately, pre-date this level of income.

kingstreet

A lender will want to see two years of director's remuneration and dividends and will take an average of those two years.

You'll be asked to supply accounts and/or SA302s to evidence that income.

It may be a good idea to talk to an independent mortgage broker who can lay out the options for you and that will include avoiding certain lenders who are not too keen on such cases.

HappyMJ

You'll be penalized for taking a 95% mortgage...the advice so far has been continue to save for another year or so and you can get a much lower rate of interest which will enable you to borrow what you need.

You could lose your income and the lender only has 5% equity to fall back on to get their money back...they want more.

You could with your high income borrow some money on an unsecured loan from another lender and use that for your deposit. You'll need to declare the source of the deposit to the mortgage lender but as long as both payments are affordable then you should be able to secure a mortgage sooner rather than later.

tomcc1

Thanks for your comments everyone.

A broker it is! I can't get my head around the idea of borrowing a deposit, this seems counter-intuitive to me as wouldn't the lender be concerned by that?

I understand it's a higher risk to the lender and hence you pay a higher rate - I accept that fact. For us it's about buying sooner as the higher rate has to be balanced with the rent we effectively throw away each month. Our goal would be to only stay in the house for maybe 3 years and in that time save more money and re-mortgage or move on a better ltv.

The main goal of this thread was to establish whether a) a couple of mistakes on my credit file would affect us badly and b) to see if we'd be considered on a 95% ltv with our situation.

It sounds like we almost just need to go through the process with a broker and see what happens?

kingstreet

tomcc1 wrote: »

It sounds like we almost just need to go through the process with a broker and see what happens?

Yes. It's not possible to go through a factfind on here to give you anything more than a speculative answer.

A broker will be able to give you a more certain response based on establishing your circumstances.