Help with debts and saving for deposit

Amy36

Hi, hoping somebody can just offer us some advice!

Me and my partner both have a loan each, paying off work we had done on a previous property we owned. We had a lot of debt on credit card too and sold our house to try and sort it out. We are now currently renting after selling up and paying credit card debt off and desperately want to own our own home again! We have £16000 left of our equity from our house sale, and we are using this as a deposit on our next house. Now we have sorted our finances out, we can save around £800-£1000 a month from now on to add to our £16000.

My loan is £195 a month, currently £10200 left on it.
My partners loan is £136 a month, £7900 left on it.

My income is £14000, partners income is £32000 basic with around £14000 more a year in commission.

My questions are - is our amount of debt going to stop us getting a mortgage? I know the monthly payments are affordable, but is my income to debt ratio bad and likely to affect us?

What are we best doing with our £800-£1000 a month spare, paying loans off or saving towards a 10% deposit instead of a 5% one?

We are looking to buy a house towards the end of this year, approx. 260k?

Our credit scores are now 999 out of 999 on both our Experian accounts, but I have one late payment charge for a credit card one month, which was 12 months ago, is this likely to stop us getting this amount of mortgage?

Any advise appreciated! Thank you

HappyMJ

Late payment over 12 months ago will be fine don't worry about that one.

The loans you have outstanding will affect the amount you can borrow.

You'll be close to the limits but it might be possible.

Personally, I would repay the loans you have outstanding but you do need a minimum of a 10% deposit to get anywhere near good rates of interest so I'd make sure I had that first. That would be £26,000 plus probably another £2,000 for fees and charges and £3,000 for SDLT.

Amy36

Thanks for replying, good to know not to worry about late payment a year ago. everything else is fine on credit report.

So it's best to save towards bigger deposit then, by the time I have the 10% my debts will be reduced a lot already by paying the monthly payments hopefully!

I was thinking of going to NatWest for mortgage, as I had one previously with them, or Barclays as I bank with them, does anyone know if I would have a good chance with them with our level of debts and our income, or try a mortgage broker?

Thank you

Filo25

Amy36 wrote: »

Thanks for replying, good to know not to worry about late payment a year ago. everything else is fine on credit report.

So it's best to save towards bigger deposit then, by the time I have the 10% my debts will be reduced a lot already by paying the monthly payments hopefully!

I was thinking of going to NatWest for mortgage, as I had one previously with them, or Barclays as I bank with them, does anyone know if I would have a good chance with them with our level of debts and our income, or try a mortgage broker?

Thank you

That is what I would do in your position (and is pretty much what I am doing myself in a similar position), the monthly loan payments aren't excessive so a more limited effect on affordability.

Have look at some of the online affordability checkers (Nationwide do one in a fair amount of detail) and you should get an idea of what you can borrow.

Not an expert in the area myself by any means so not sure if different lenders have different attitudes to commission income but that is the sort of thing a broker can no doubt help with.

Good luck!

Thrugelmir

What rate of interest are you paying on the loans ?

Amy36

we are paying 3.6% on one, 3.7% on the other, we have just consolidated debts which were higher interest and managed to get these low rates, the loans are for 5 years, started last month. Does anyone know if we are likely to get a 5% mortgage if we pay our spare money off these debts instead of towards a 10% deposit to get the overall debt amount down a little, or is it best to leave the loans be and pay into savings? I am just unsure what to do, just incase a house comes up that would be suitable for us! Thank you x

Thrugelmir

Amy36 wrote: »

we have just consolidated debts which were higher interest and managed to get these low rates, the loans are for 5 years, started last month.

Won't go unnoticed by lenders when analysing your credit file.

We are looking to buy a house towards the end of this year, approx. 260k?

Suggest that you tackle your debts head on if this is your dream. Shuffling them around is just conning yourselves.

bilbodreams

I would pay off the debts with the 16000 and then really concentrate on your savings , 800/1000 +331 pcm. I find that keeping a spending diary helps to focus, within a couple of years you could build a nice deposit and no debts

AnotherJoe

I agree with other posts you are kidding yourselves that you have £16k saved, once you deduct the loans you have nothing.

Look at it another way, let's say you had no loans, no savings, and then one of you borrowed £10k and the other £6k. Would you then say you had £16k savings?

Pay the loans off, then save. Otherwise I'd be very confident a lender would not regard your deposit as real because its no different to taking out a loan to get your deposit.

Chocolatefund

You are paying interest on those loans...pay off those loans!!

You are entirely focused on getting that home as soon as possible. I understand the dream of home ownership but don't make your goal posts financially unrealistic.

Amy36

Thanks everyone for all your advice and opinions it's given me a lot to think about! I will just be so sad to see my account with nothing in it if I pay off my debts but i know this would be the best thing to do and what most of you are advising me. It's just driving me mad renting I just unfortunately got into debt when I should have sorted it all out years ago.

I think I'd rather get my own house just a small one for now and maybe stay there for around 4 years until all them loans are completely gone and I have saved up more as well then go for my dream home of around 250k. I would be much happier in a home of my own. What are your thoughts on how I would go about this? There are a few houses I have seen for between £140-£160. Does anyone think I have a chance of a mortgage for that I would have the 10% deposit and if I pay some debt off for 6-8 months or so first (around £7000 possibly more off the debt) and go for this idea around October. I seriously can't rent any longer than that please tell me you think I would have a chance or tell me again if I am just kidding myself haha thank you everyone x