Had Pay-day loan once, 3 years ago. Will it affect my mortgage application?

yessuz

So question quite simple.
Three years ago, I had an emergency situation and borrowed few hundred pounds from a pay-day loan. I have paid it back as required and never had one after that.

Actually, I am also debt free (me and my wife both have credit cards from our bank LLoyds, issued more than a year ago, which balances are 0 (cards been used for bits and bobs, but everything is paid of course)), we have no car finance (had, but paid off much earlier), etc.

we are planing to apply for a mortgage with my wife in half a year or so.
However, when I look at Experian report, for example, I see that that pay-day loan is visible on my account. (with info the it's been paid off).

will it affect our mortgage availability/affordability? or, since I got good credit history and record after that (never missed a payment, paid off, etc.) it should be fine?

ACG

It would not stop you getting a mortgage, but you should check the lenders criteria on pay day loans before you apply as some may not like it, although it will be the minority of lenders that do not like it.

yessuz

many thanks!
in addition - since we are going to apply as first time buyer - would there be a huge difference between 10% deposit and 5% deposit with Help to buy?
or would the 10% deposit still qualify only together with help to buy?

I am asking this, because when I check with few mortgage calculators, there was quite a difference on the interest rates. I have this understanding, that 5% is enough for first time buyers on the help to buy scheme? but 10% - in some cases is ok to go separately?

ACG

5% and 10% you can do it with or without the use of help to buy.
There are 2 versions of help to buy, one is an equity loan (htb one and only available on new builds) the other is an insurance policy between the bank and lender (htb two available on new builds and non new builds).

GoldenShadow

I found the biggest drop in interest rates for close LTV brackets was 5-10%. I was looking at 15% and it was barely any different, would have to have been putting down 20% to see something worthwhile enough for us so we just went with 10%. It's personal choice, lots seem to do 5% but the rates seemed a lot higher when we applied.

DGE199

As ACG mentioned - some won't like it, some will point blank refuse to lend to anyone with a PayDay loan in the previous 6 years. I know that NatWest are one of these as that's who we're applying with!

I'd suggest using a broker as they're more likely to know who will and won't lend to people with PayDay loan history!