Can we do this?

wootsit

Hello, long time lurker needing help!

I was wondering if someone could give me some advice on whether it is likely that me and the OH will be able to obtain a mortgage with the following information. I understand that it will be very subjective and we do plan to see a broker in the new year but don’t want to start anything if it is a non-starter!

We have owned our current home for the past 5 years – currently valued at £200-210k (£200k is what next door sold for so will use that). We currently owe the following

Mortgage - £126k
Loan – £12k
Credit cards - £14,700
Car on standard HP - £9k
Car on PCP - £10k

We have some shares that are just about to mature and have sold some stuff so have roughly £7k that will be used to pay off some of the CC debt in January.

I understand that we have what looks (and feels) like an awful lot of debt but the loan and some of the CC debt was to do work on the house that has obviously improved the value.

Ideally our plan is to market the house from March/April time (we will save £1k per month until then so have hopefully paid off most, if not all of the credit card debt by the time we were to move) and use the equity from the house to pay off the remaining debt, bar the car on PCP, leaving us with £53ish (or £43ish if we paid off both cars).

We were then hoping to purchase a house for around £275-290ish putting in whatever is left after fees etc (should it not need any work – we would like to keep some back in those circumstances).

We have a joint income of £63k and to be honest will be better off without all the horrible debt payments! However, is it really unlikely that we will be offered a mortgage given our previous credit usage? We have not added to the debt recently and do not plan to again, but I know that is what everyone is likely to say!

Also, if possible we don’t want to pay off the car on PCP – it is on 0% and is not really a ‘family’ car so are likely to want to change it at the end of the 3 years (annoyingly had to take this out in September due to old car dying!) However, would it be more likely that we can get a mortgage if we did pay it off? Current payment is £165 pcm.

I know the answer is to probably stay put and pay everything off but house prices near us are rising and soon we will be priced out of being able to get the type of home that we would like

Therefore if it is unlikely that we will get a mortgage we will rent for 6-12 months if that would make things better for us?

Any help/ideas on this gratefully received!

Thrugelmir

How are proposing to fund the move? Legal fees, stamp duty etc.

Purely from a personal view. I would spend a few months getting my house in order financially. Given this statement you made.

We have a joint income of £63k and to be honest will be better off without all the horrible debt payments!

A £250k mortgage may seem affordable at current levels rates of interest. Once they do start to rise. Perhaps not so palatable.

amnblog

Yes, from what you have said you can do it.


Whether you decide to remains to be seen.


One for a broker given the tight affordability.

Foxy-Stoat_3

So you want to go from a 63% LTV mortgage to a 85% LTV mortgage, effectively turning your unsecured debt into secured debt and up sizing your house at the same time?

I would spend a few more months/years reducing your unsecured debts and then look to up size your home, maybe buying cheaper cars outright and knocking the HP on the head for a few years.

Let_Us_See

Even excluding the £19,000 car loans you have still managed to accumulate £26,700 of unsecured debt whilst servicing a £163k mortgage!

Depending on your retained monthly car payments, it should be possible to meet your objectives, but your record of operating at such high debt levels will scare of many lenders. One for a broker to sort out.

Pete9501

Sell the second car on hp and use the cash plus savings to pay off the credit card would change the picture quite a bit.

Do you need a £9k car? nope, a £1k Peugeot or Ford will do for a few years.

We sold the Discovery and bought a series of little Pug 106s to drive to and from work. Cheap and cheerful, motoring without any loans for cars helped us.

wootsit

Thank you so much for taking the time to respond and it is good to know that this may be possible.

I do understand that we will be essentially making the unsecured debt secured and that this is not ideal. Unfortunately we would like to start a family soonish and just cannot wait the nearly 5 years it would take to clear everything and our current home is not suitable for a family.

Our hope is that by buying a forever house now and taking a 'hit' will allow us to erase all our bad judgement over the past few years. A lot of the debt (£22k initially) was for major home improvements - it is just that we haven't been very good at making the big over payments we initially planned and therefore will not be making what we had initially hoped you live and learn!

On a seperate note, how do you go about finding a good mortgage broker? We have never used one before and don't know anyone who has either! We are Cheshire based if anyone has any recommendations (if that is allowed!)

Thanks again :T