FTB & debt. Any chance at getting a mortgage?

Sunshine53

Our situation is pretty complex so I would appreciate any advice you can offer.

Myself and my husband have around £17k debt.

10k loan, which we have unfortunately defaulted on and the rest on CC.

We consolidated some debts and took out the loan a couple of years ago but then ran into trouble when I was made redundant just before starting maternity leave.

I ended up receiving no maternity pay whatsoever so our finances took a big hit.

We pay a token payment on the loan every month which the lender seems to be happy with for now but it unfortunately shows as a default on our files.

We are steadily paying the CC's off each month.

There were some late payments when we first ran into trouble but not recently.

We currently privately rent and have never missed a rent payment.

My husband currently earns £24k a year, after a small rise last year and we are managing our finances a lot better.

My in-laws have very kindly offered to clear the debt and gift us enough for a 10-15% deposit on a house.

In there words, they would rather us have our 'inheritance' now, when it would help us massively. They have also said that they would be willing to act as guarantors if that is still a thing and would help.

Is there any chance at all that we would get a mortgage? A suitable house in our our area is around 115-130k.

Our credit rating is not good, but it is not through silly spending and not being careful. It was a case of trying to survive on one wage when I lost my job and with a new baby.

I plan to go back to work part time in around a year when my little one is 2, which, depending on childcare costs, should hopefully mean that we will have a bit extra coming in but for now we are living on husbands wage and child benefit.

I realise that typical high street lenders would probably knock us back straight away but we are happy to speak to a broker and discuss all aspects. I'm just wondering if we would just be wasting there time?

Thank you in advance for any helpful advice.

ACG

A lot will depend on when the defaults happened. I am assuming probably 12 months ago based on how your post reads.

There are potentially options with a 15% deposit, regardless of whether the debt is cleared or not...financially you may be better putting down a bigger deposit, morally the answer is different but I am not a priest.

I would suggest you get your credit reports (equifax, experian, call credit) infront of a good experienced broker.

Sunshine53

I'm not exactly sure when the default showed on our files but our first missed payment on the loan was Jan 15.

To be honest, I didn't think we'd have any chance of getting a mortgage with that debt even with a larger deposit?

Thank you for your reply!

Sunshine53

We've recently got our reports from Noddle. Do we need to look elsewhere as well?

ACG

Its worth getting all 3 as they can be different.

The debt being there is not a problem (assuming you pass affordability) the important bit is the dates of the default(s).

Sunshine53

We live within our means and we haven't added to the debt for quite a few months now. I'm not sure how they calculate affordability though. However I assume the mortgage would be less than our current rent payment if that's relevant.

I will look into getting the other reports. Thanks

jen1301

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Thrugelmir

Take the offer of the money to clear your debts. Then at least your credit profile is reset to zero. Giving you the opportunity to prove that you can manage your personal finances well. Time heals as they say.

Sunshine53

That was my initial thought. However the in laws don't agree with renting and are very keen for us to buy. As are we.

In ther eyes, we're wasting our money by renting and should at least try to get a mortgage.
Hence why I'm wondering the likelihood.
Thanks

Thrugelmir

Sunshine53 wrote: »

That was my initial thought. However the in laws don't agree with renting and are very keen for us to buy.

I'm sure they are. Simply clearing your debts doesn't alter your history though. From a lenders perspective they'll want to see a clear period where there's evidence that you can manage your financial affairs properly.

The token payment on the default is something that you should address. Whatever course of action you take. As this is highly damaging your profile.

foxy-stoat

Sunshine53 wrote: »

That was my initial thought. However the in laws don't agree with renting and are very keen for us to buy. As are we.

In ther eyes, we're wasting our money by renting and should at least try to get a mortgage.
Hence why I'm wondering the likelihood.
Thanks

I had a similar discussion with some older folk a while back with them thinking renting is dead money - I ended up proving that its only around 40% dead money - assuming you have enough in savings for a deposit - if you have no savings then its irrelevant as its only real option.

Take their kind offer to clear your debts and get them to put say £1000 a month into your account or a NS&I savings bond for the next 12 months or so or maybe in a help to buy ISA.

Use this time to get your debts cleared and cards cancelled, leaving one with a £500 limit, use this to buy food and fuel and clear it every month, keeping up your credit history. You will be able to save the monthly payments you would be making and adding to the deposit your in laws pay.

After 12 months you can go to your broker or lender and have 10-15% self saved deposit.

This will put your defaults another 12 months in the past, you can justified renting for another year as getting a mortgage in a years time should be easier - although the counter argument would be house prices may well increase faster than expected in the next 12 months, but a counter counter argument would be that with all the Brexit BS less houses are on the market at the moment.