Applying for a mortage

clocourtney

Me and my partner are going to be applying for a mortgage in the next 2 months. I just wanted some advice on what our chances are as I am a bit worried about certain aspects.

First question: 1 week ago, I was pestered into getting a New Look store card. I read they have a 14 day cooling down period so I am going to ring and cancel tonight. However, will this still show on my credit file despite cancelling within the first 2 weeks?

Second question: When I was a student two years ago, I was able to have a planned overdraft free of charge up to £1500. All of my wage and outgoings go into a separate account so I have never cleared that off. As it is planned and classed as graduate account still, will this negatively effect me?

Third question: I got a Tesco bank loan 2 years ago and still have around 2.5 years left. I pay this back every month on time and have never missed a payment. My credit rating still shows high on experian etc but I am still worried this will go against me. Will they class this as low risk as it is so long ago?

Me and my partner both have excellent credit scores, always pay credit cards, bills and rent on time and both have well paid jobs. Any advice would be great as I am working my self up over this.

Thanks in advance!

[Deleted User]

Q1: Yes - it will show as a closed account

Q2: It will show on your credit files that you had an overdraft and you used it - this may impact you negatively

Q3: Again this may go against you as it shows you are desparate for cash and needed a loan to achieve this

Ignore you scores/points/ratings - they are made up and meaningless and lenders do not see them or judge your credit-worthiness by them

I would speak to a broker rather than a high street lender

spadoosh

1) It will show on credit report. They can take time to update so whether or not it shows as closed will depend on how quickly they update the CRA's.

2) Overdraft use isnt looked at favourably but then if everything else ticks the right boxes it shouldnt hold you back too much.

3) It wouldn't be considered low risk, youre still paying it. They factor in any existing debts to your affordability. Say you pay £100 per month on the loan, theyll deduct that amount from what they think you can afford, so say they thought you could afford a £500 mortgage, they would only offer £400 ( a simplistic view).

Stress test your finances is the best way of looking at it. Work out how much youll be spending every month. Then adjust the mortgage amounts so its reflective of a higher interest rate (the go to figures are about 8%). If it looks affordable at that stage you shouldnt have too many issues. If it doesnt look affordable, the debts and action on the credit report will have a bigger impact. Be conservative with your figures, over estimate costs and under estimate income (unless youre 100% certain on it and it not changing) and again the more affordable it looks whilst being more conservative with your numbers the more likely you are to be accepted.

Ultimately though lenders can pick and choose who they want. Some might not want you, others might be keen to have you as a customer, just depends on what they want. All of them will want you to show you can afford it though.

DCFC79

How much of the overdraft can you pay off ?


There are 2 other agencies who lenders can use, not all will use Experian so check them out, Call Credit (Noddle) and Equifax (clearscore) are what you need.

clocourtney

Thanks for the replies! I cannot pay anything off the overdraft at the moment however in the few months I should but this will be after the mortgage application. I will check the other credit agencies see how I compare on them. I will still close the store card as its not needed. Silly me getting suckered in!



Thanks again

[Deleted User]

Is the overdraft at £1500?

How long would it take you to save the up again?

If you have money for a deposit put aside I would pay off the £1500 on the overdraft, then look to build your deposit back again.

How much is left on the loan as well?

clocourtney

The overdraft is at £1450 at the moment. We keep putting money in there to try pay it off but then something always comes up. Ive never gone over the £1500 limit though. I don't get charged interest on it because its classed as a graduate overdraft but I would still prefer it to be gone.



I would say a few months to save it up again, but the house is reserved and the estate agent is putting in the mortgage application at the end of June!


The loan has got 2.5 years left at £178 per month so I would say around the £5500 mark.



One thing in our favor is we currently pay £700 a month rent but the monthly mortgage figure is coming out around £450 per month.

Candyapple

clocourtney wrote: »

First question: 1 week ago, I was pestered into getting a New Look store card. I read they have a 14 day cooling down period so I am going to ring and cancel tonight. However, will this still show on my credit file despite cancelling within the first 2 weeks?

If you knew you were going to be applying for a mortgage in 2 months time, why did you do this? Pestering is not an excuse, this will have cost you a hard search which could be fatal should your application not be straightforward and you need to apply for more than 1 lender.

clocourtney wrote: »

Second question: When I was a student two years ago, I was able to have a planned overdraft free of charge up to £1500. All of my wage and outgoings go into a separate account so I have never cleared that off. As it is planned and classed as graduate account still, will this negatively effect me?

Is this now paid off? If not, it can potentially go against you depending on how much you are looking to borrow.

How much do you have saved?

How much are you looking to take a mortgage out for?

clocourtney wrote: »

Third question: I got a Tesco bank loan 2 years ago and still have around 2.5 years left. I pay this back every month on time and have never missed a payment. My credit rating still shows high on experian etc but I am still worried this will go against me. Will they class this as low risk as it is so long ago?

My broker told me that any cc/loan debt we had the bank would take 5% total as minimum monthly repayment and deduct this from your salary multiples so your mortgage offer amount will be decreased accordingly (regardless of if your min repayment is 1% or it’s on 0% deal). So in my case my partner had £10k on a 0% purchases card (money was sat in savings account alongside) and when we ran the figures of making an application with the debt vs clearing it entirely, it reduced our mortgage offer amount by roughly £30k.


Please list all credit card limits along with outstanding balances.

Do you have any other loans / overdraft / car finance etc?

What is your annual salary?

Answer the above for yourself AND your partner.

[Deleted User]

clocourtney wrote: »

The overdraft is at £1450 at the moment. We keep putting money in there to try pay it off but then something always comes up. Ive never gone over the £1500 limit though. I don't get charged interest on it because its classed as a graduate overdraft but I would still prefer it to be gone.



I would say a few months to save it up again, but the house is reserved and the estate agent is putting in the mortgage application at the end of June!


The loan has got 2.5 years left at £178 per month so I would say around the £5500 mark.



One thing in our favor is we currently pay £700 a month rent but the monthly mortgage figure is coming out around £450 per month.

Really, these should have all been settled before applying for a mortgage.

£450 per month for a mortgage - are you paying interest only?
What is the term of the mortgage?

If it will take you a few months to save up around £1500 again, what would happen if for instance you needed some urgent home repairs carrying out - flooding, failed boiler etc?

All this is probably covered by your rental agreement but as a homeowner you need to foot the costs.

clocourtney

1) When I took out the Store Card I wasn't aware we would be applying for a mortgage so soon. The past few days have gone 0-100mph.



2) No the overdraft is not paid off however it could potentially be in the next few months but not before we apply.



3) We have 10k saved for the deposit and are looking at borrowing £146k for the mortgage.



Credit card limits - Me overall £2750. Boyfriend £1600
Currently on credit card - Me £500, Boyfriend £750.



No other loans or overdrafts but boyfriend has car finance paying £370 a month.



Annual salary combined without bonuses = £46k. With bonuses more like £50k - 52k.

clocourtney

!!! wrote: »

Really, these should have all been settled before applying for a mortgage.

£450 per month for a mortgage - are you paying interest only?
What is the term of the mortgage?

If it will take you a few months to save up around £1500 again, what would happen if for instance you needed some urgent home repairs carrying out - flooding, failed boiler etc?

All this is probably covered by your rental agreement but as a homeowner you need to foot the costs.

I agree, I wasn't planning on going for one so quick but it seems to have happened that way in the last week or so.

We are going through the help to buy scheme so for the first 5 years it is between £450-£500 for mortgage repayments but cannot remember if it was 30 or 40 years.

We have never ran out of money, just haven't been the most careful lately i.e booking a holiday to Texas for summer. We have also never thought about emergencies as it is not our house. But it is something we would think about once we owned a house

I am thinking of cancelling the holiday and just paying off the overdraft.