mortgage advice please - mortgage with unsecured debts.

garycarter79

Hi folks,
I am looking for some advice regarding our application. My wife and I are both 35 and looking to buy our first property together. We are currently renting to the tune of £775 a month and we both feel that this is money wasted.
We have a combined income of £75K per year. We also have unsecured debts of around 25K combined. These debts were considerable higher (45K) however we have worked hard at paying it back.
My wife's parents have very generously offered us 20K as a deposit towards a house. They are adamant that this money is to be used as a deposit and not to repay debts. ( some of the debt was run up when I was with my previous partner) and we have to respect this.
We are looking at properties around 200K so we would need a mortgage of £180K so 90%LTV. What effect will have our unsecured debts have on our ability to obtain a mortgage? I should add that all of her debts are up to date with no late payments or anything adverse on our credit files ( we have checked!!)
Would a high street lender consider us with £25K unsecured debt or would we need a broker? My wife seems to think it will be an issue but then I know a lot of people who have moved house owing similar amounts on car loans/finance etc??
Any advice??


thanks in advance!

Thrugelmir

From a lenders perspective. Good income. However no savings of own, high level of unsecured debt both historic and current along with a deposit is 100% gifted.

Lenders will assess affordability at 7% interest rates irrespective of what they are now.

Seems as if you've been given a great opportunity to turn things around. If you're willing to put some hard graft in. As you've the income to make sizable inroads into your debts in a short space of time. .

ACG

There will be lenders for this, you do have good incomes which will help. Just ensure it passes affordability and there will be lenders who will consider it.

garycarter79

ACG wrote: »

There will be lenders for this, you do have good incomes which will help. Just ensure it passes affordability and there will be lenders who will consider it.

Thanks ACG. Would these be high street lenders or will we be looking at higher rates of interest?

ACG

Based on what you have said, I would be surprised if you could not get a few high street lenders to look at it. It might not be one for all of them though for the reasons you and thrugel have mentioned.

GMS

High street assuming no credit issues.

Having debts doesn't make you need a specialist lender.

A broker would be useful for you. Get copies ofcredit files from Experian, Equifax and Call Credit and speak to a broker,

garycarter79

Thanks for the replies guys. It's pleasing to hear that we may be able to get a decent deal. Our credit files are fine as we have no late payments etc. I guess the only thing acting against us is our debt! It's frustrating as our mortgage payments won't be too much different to the amount of rent we are paying so we will be able to continue to clear the debts at the same rate that we are now.


Is it common to apply for a mortgage with some degree of unsecured debt?

ACG

Not £25k worth no - not in my opinion anyway.

That being said, this month I have done 2 where people have in excess of £30k worth of unsecured. One of which was at 90% LTV and went to offer yesterday - so it can be done.

garycarter79

ACG wrote: »

Not £25k worth no - not in my opinion anyway.

That being said, this month I have done 2 where people have in excess of £30k worth of unsecured. One of which was at 90% LTV and went to offer yesterday - so it can be done.

Thanks ACG
It's interesting to hear it from a mortgage advisers perspective as I think that there is a misconception that everyone is up to their eyes in debt whereas you obviously see the real picture.

I know that my sister and her partner remortgaged recently with around 30K of debts but they had a better LTV so I suppose that helps.

ACG

Ive only been an advisor for 2 years so a lot of my clients are first time buyers, if people are living at home or saving up for a house its to be expected that they would not have £5-10k + in debts.

Maybe when I have been doing the job for 5-10 years and I start to see the same people coming back after buying their home, doing it up, buying expensive holidays etc it might be more common.

I also think following the last 7 years or so people have tended to get on top of their finances a little more. You have nearly halved yours, when I lived in a pub pre credit crunch we were turning over a lot of money, following it our turnover pretty much halved. You dont really see as many adverts for your flexible friend anymore do you? I cant think of any credit card adverts on TV at the minute.

What you want can be done and at normal or near normal rates. I was at a conference in November and one of the lenders there was saying they are not bothered about debts when consolidating as they write out a cheque for every company and send it to them - so they know it is getting paid off.

MJP43

Do lenders base it on debt vs income ratio?

E.g Is someone with 15 unsecured on 35k income scored lower than say someone with 25k on 90 income?