1st Mortgage Fears

2iggy

From 18 I began using store cards and got myself into some debts, I steered away from pay day loans and my now fianc!e helped me clear the debts but I know through occasional missed payments on bills and going over drawn etc I messed my credit rating up. I am sorting it out, slowly but surely getting back on track and my credit rating is now increasing and looking much better than it ever has in the past.. We are looking to go for our first mortgage at the same time I am going back to college to get my a-levels and get my degree so my wages are going to drop to about £12.5k. Will I get approved for the mortgage on this salary if my credit score is ok?

mrginge

How much are you looking to borrow?

2iggy

£180k - my earnings will be around £12-12.5k and my partners £24.5k

HappyMJ

2iggy wrote: »

From 18 I began using store cards and got myself into some debts, I steered away from pay day loans and my now fianc!e helped me clear the debts but I know through occasional missed payments on bills and going over drawn etc I messed my credit rating up. I am sorting it out, slowly but surely getting back on track and my credit rating is now increasing and looking much better than it ever has in the past.. We are looking to go for our first mortgage at the same time I am going back to college to get my a-levels and get my degree so my wages are going to drop to about £12.5k. Will I get approved for the mortgage on this salary if my credit score is ok?

Not on your own....yet.....but you mention "we".

£12,500 is just about enough to pay the ongoing bills for a couple. It isn't enough to secure a mortgage to buy a whole property.

If you have no income whatsoever and a rubbish credit history but your partner has plenty of income and an excellent credit history then you as a couple can get a mortgage secured by your partners income and credit history. You'll need a good deposit and be able to afford the mortgage on the proposed property taking into account any monthly commitments either of you have.

Why not rent a small flat until you both have a decent income and an excellent credit history? You will then be able to borrow more against both of your incomes and buy your "forever" home. It will be 6 years from your last default before they defaults drop off your credit report.

Look at properties to buy and get a feel for values and keep on saving every penny you can and in a year or so when the defaults have gone think about buying a property.

2iggy

Yes there's both of us applying - we have a deposit of 20%. We currently rent but we only have this contract and then we need to be out, we rent in Oxford and it's quite expensive so were hoping to move to a cheaper area and stop spending more money on rent than we would a mortgage...We have pets so renting is hard to come across

HappyMJ

2iggy wrote: »

Yes there's both of us applying - we have a deposit of 20%. We currently rent but we only have this contract and then we need to be out, we rent in Oxford and it's quite expensive so were hoping to move to a cheaper area and stop spending more money on rent than we would a mortgage...We have pets so renting is hard to come across

A £180,000 mortgage at the standard variable rate of 4% plus 1% over 25 years would cost you £1,052 per month.

That's not cheap. Are you sure you want such a large commitment on relatively low wages?

They'll also want to know how you managed to save £50,000.

2iggy

I used a mortgage calculator and it wasn't that high? I was expecting around £700 a month!

HappyMJ

2iggy wrote: »

I used a mortgage calculator and it wasn't that high? I was expecting around £700 a month!

That's with the introductory teaser rate. Try using the Standard Variable Rate or the interest rate the mortgage will revert to be when the introductory period is over and add 1% to allow for increases in the base rate of interest. That will be your ongoing payment and the payment they'll use to calculate your affordability.

2iggy

Ok thank you!


I must admit you've lost me slightly - what is standard variable rate?


I am completely lost in a big ocean of mortgage talk at the moment and don't understand a word of it!

HappyMJ

2iggy wrote: »

Ok thank you!


I must admit you've lost me slightly - what is standard variable rate?


I am completely lost in a big ocean of mortgage talk at the moment and don't understand a word of it!

You will be applying for a first time buyer mortgage which would be around 1.5% fixed for something like 2 years which produces a £720 a month payment over 25 years.....it's a good rate but that's only fixed for 2 years. At the end of the 2 years the mortgage becomes a variable mortgage charging the standard variable rate which might be 4%. Some banks charge 3.5% and some other banks charge 4.5% or more. You need to know this rate and figure out your affordability from this. If you add 1% to the SVR then you've got a little leeway to allow for a small increase in base rates. If you can afford a mortgage based on this then the amount you're borrowing is sensible. I would think on a combined income of £36,000 you could easily borrow £145,000 which would be £850 a month which is about a third of your take home pay after the introductory period has finished which should be fine. You would then have a 25% deposit on a £200,000 property.

M0ney

Not an expert opinion or anything but it does sound like you're trying to borrow a lot given your income....£180,000 is nearly 5 times your salaries combined. If it were me I'd be looking for something cheaper but then I'm not familiar with your area.