95% newhome mortgage with excellent credit but satisfied default - can we?

Whizzy1979

My husband and I will be trying to get a mortgage at the end of summer when 2 of my husbands 3 defaults will be removed from his credit record (6 years old) they are all satisfied. 1 will remain, this is satisfied but not due to come off for another 2 years.
Since these hiccups (in part caused by the selling of a previous property due to relationship breakdown causing negative equity and previous joint debts with ex), my husband has good credit and no further issues - showing as excellent on experian, as do I. He now has a sizable wage (higher tax bracket) and my part time wage is £10k.
We have managed to save £20k for a deposit and we have been looking at newbuilds iro £240k. What are our chances taking into account the default and the fact that our deposit is relatively low compared to the overall amount?
We were hoping to try and get on one of the government incentive schemes for newbuild....any tips/advice appreciated

ACG

Are you looking to use the equity loan scheme or a 95% mortgage?

If the former, I cant help.
If the second scheme then there will be a lender who will consider it - assuming affordability/the property stack up.

amnblog

Based on where the market stands today your chances are slim at 95%.

Whizzy1979

It would be the 95% mortgage option rather than the equity loan scheme and pay off rather than interest

kingstreet

There are very few options for higher LTVs on newbuilds with many lenders topping-out at 80% and 85%.

Depending on the builder concerned, you may have HTB - Mortgage Guarantee as an option with one or two lenders, but this is pretty much based on a clean credit history.

Same with NewBuy, if the builder and its chosen lender are still offering it.

Is there any reason you aren't considering equity loan?

If you mean interest-only, don't worry it won't be an option open to you anyway.

Whizzy1979

We were a little concerned about some of the small print for an equity loan and also if we would be eligable.

kingstreet

Small print?

What like?

You borrow 10% or 20%. When you pay it back in upto two chunks it's based on the property value at the time of repayment.

It's interest-free for five years, with payments starting in year six at 1.75% and increasing each year at RPI + 1%, so assuming 5% inflation it would be 1.87% in year seven, 2.0% in year eight and so on. See page 14;-

http://www.homesandcommunities.co.uk/sites/default/files/our-work/help_to_buy_buyers_guide_010814.pdf

Mortgage rates are based on the LTV including the equity loan, so a 2 year fix is about 2.5% against a HTB - MG or NewBuy rate of around 5%.

It's not for everyone, but you should get all the facts and consider all options.

BTW as long as you won't own any other property and fit the affordability calculator, you're eligible. Pretty much anyone who can get a mortgage can buy a newbuild with an HTB - equity loan.

Whizzy1979

Thanks Kingstreet, I guess we hadnt really read up about it a great deal as we thought it was similar to a shared equity option. I will have a look at the link on page 14.
We do not own any other property and I am 99% sure we will fit the affordability as we have been working out our expenditures pretty thoroughly and trying to plan for mortgage rate hikes etc. as I am aware that the mortgagee procedure is starting to introduce a strict interview. TBH we were looking at newbuilds mainly because we thougt our options would be few and far between on the pre-owned homes basis due to our small deposit and we had seen lots of seemingly good offers which applied to newbuilds.

stator

New builds are harder to get than old houses, new builds are more uncertain with a greater risk of negative equity. The Help To Buy Mortgage Guarantee scheme is also simpler.

Whizzy1979

thank you Stator, I guess all of our preconceptions were well out!

kingstreet

You certainly don't buy a newbuild if you don't plan to live there five years or more.

It's like new car syndrome, it drops in value the minute it touches the road, so you may not get back what you paid if trying to sell a new home within a few years of its purchase.

HTB - MG is just a mortgage upto 95%. There is nothing different about it from the borrower's point of view. The Government bit is related to protecting the lender against repossessions and the rate reflects that as you are effectively paying more to create a fund to cover the cost of them.

NewBuy is pretty much the same thing, except the builder also pays 3% of the purchase price into the repossession fund.

Why don't you talk to an independent broker? They will go over the different options available to you and compare buying second-hand with newbuild.