Mortgage Application Question (Affordability)

stu2500

Hi all, I'm looking for some advice on mortgage affordability. You have all been helpful on my previous questions and hoping for the same.

My partner and I are saving for a home and will be purchasing in approximately one year. Our circumstances are as follows:

App 1
Salary £21,000
Commission £8,000 (annually and have received this the past 5 years)

Debts
Loan payment £197 (o/s balance at time of application £6,500, consolidation loan taken in 2014)
C/C balance at time of application £5,500 (all interest free, and hopefully lower as I'll be paying more off month by month)

Monthly Outgoings (other than current mortgage and utility payments which are £380 per person)
£197 (loan)
£130 (CC)
£20 (gym)
£23 (phone)
£450 savings to mortgage deposit

App 2
Salary £25,000
Bonus £2,000 (annually)

Monthly Outgoings (other than current mortgage and utility payments which are £380 per person)
£160 (car payment)
£150 (CC)
£20 gym
£40 phone
£450 savings to mortgage deposit

We both have very good credit files with no missed payments and searches recently. I'm fairly clued up on keeping a good clean credit report now after the advice on here over the years.

I suppose my main question is, will I be turned away for a mortgage because of my loan and CC balance? I have done the calculators for various lenders and all come back fine. We're aiming to buy a house for £125k with 5% deposit.

Neutrinno

You are really best off using a lenders affordability calculator which will use this information, they can be found online. We would just be guessing by giving you a figure here.

kingstreet

Card debt payment is usually taken as 5% of the balance, so your £5,500 is going to be £275 per month off your mortgage affordability not £130.

Make sure you put in the balance in the right box on lender calculators, and not the minimum, or amount you choose to pay.

stu2500

kingstreet wrote: »

Card debt payment is usually taken as 5% of the balance, so your £5,500 is going to be £275 per month off your mortgage affordability not £130.

Make sure you put in the balance in the right box on lender calculators, and not the minimum, or amount you choose to pay.

Thanks. I have been doing that and all seems ok for the loan we need (in theory obviously). My main aim is to reduce the debt as much as possible before applying

erin110

From the information you have provided it seems feasible however, you are right to question it as some lenders can be stricter than others in terms of offering a 95% mortgage with the level of unsecured debt you have. It’s not clear how much unsecured debt in total app 2 has but looking at yours it appears your unsecured debt totals more than 50% of your basic income. If you really want peace of mind, I recommend using a broker as they will have a better idea as to which lenders have an appetite for this type of lending. Also something to mention is that although financially it doesn’t make sense to try and reduce your 0% credit cards before trying to reduce your loans, lenders do prefer it if you do not owe up to your credit limit on your credit cards.
Credit card debt is usually taken as 3% but some will calculate as high as 5%.

Thrugelmir

stu2500 wrote: »

Loan payment £197 (o/s balance at time of application £6,500, consolidation loan taken in 2014)
C/C balance at time of application £5,500 (all interest free, and hopefully lower as I'll be paying more off month by month)

Asked rhetorically. Has the credit card debt been accumulated since the consolidation loan? Is the primary source of your deposit?

How much debt does your partner owe?

stu2500

Thrugelmir wrote: »

Asked rhetorically. Has the credit card debt been accumulated since the consolidation loan? Is the primary source of your deposit?

How much debt does your partner owe?

Our savings will be the primary source of deposit, which will be accumulated over the next year.

I'd have to look in to how long I've had the credit card and balance it has been over the years. I used it to purchase furniture when moving into my rented place around January 2015, hence the reason the balance went up.

She owes approximately £2,000 on a CC