Could this be possible?

raymond78

Hello,

This might be a bit long winded sorry!

We are a married couple aged 40 & 38. We currently live in the Midlands, however I work around 100 miles away. We are desperate to relocate nearer to my place of work. We have friends and family there and we feel it will be a nice placer to raise our kids.

Our current house is worth around 200K and we have an outstanding mortgage balance of 65k. We also have around 50K of unsecured debt. I am not going to go into details of how the debts occurred, however they are managed well, reducing each month and manageable on our current incomes. I earn 60k per year and my wife 18k. We have no CCJ's, late payments, defaults etc - everything is always paid on time.

We assumed that the level of our unsecured debt would prevent us from moving house and getting a new mortgage. We had resigned ourselves to the fact that we would probably have to rent out our current house and then rent somewhere at our new location for a while. whilst we paid off some more debt. We could sell our current house and use some of the equity to pay off the unsecured debt, however neither of us are that keen on doing that. We would need a bigger mortgage as a result and this would effectively feel like switching unsecured debt for secured, which I know is not a great idea. The unsecured debt is well managed and at decent rates so we are quite happy to continue to pay this down over the next 3-4 years.

I have just been playing around with online affordability calculators. I was asked to input the total amount that we spend on unsecured debts each month. The figure is £1250, however I put in £1500 to air on the side of caution. To my surprise, it appears that even with this outgoing, we would still be able to get a mortgage big enough for the type of property we would want. Barclays and Halifax both stated that we could borrow over 200K. We would bee looking at house in the £280-300k region, so we would only need a mortgage of 170kish as we have a good amount of equity to put down

I know that these calculators are merely a rough guide and that we would need to do a formal AIP/DIP, however it has got our hopes up that this could actually be possible.

Does this sound realistic or would be blocked at the AIP/DIP stage due to debt level?

FTBlalala

You can apply for a Halifax AIP without it affecting your credit rating, they only do a soft search for AIP. This would at least give you an idea of how much you could borrow provided you are realistic when filling out the forms (takes 15mins or if you have all your income and outgoings details to hand).

Again this would only give you an idea as you could be accepted at AIP level but denied on full application. Best bet would be to speak with a broker.

Good luck with whatever you end up doing

raymond78

Thanks for the reply. We are going to do the AIP and see what happens! This has come as a bit of s shock as we assumed that we would be automatically declined due to our unsecured debt level.

ACG

You may find Barclays automatically decline you depending on how your unseured debt is split. They have a debt to income which I think is around 50% of your income. So if your wife has more than £9k of unsecured debt, it might be a straight decline (do not hold me to this, it is just something in the back of my mind).

raymond78

Hi,

I have been looking at debt to income ratios as it's clear that many lenders will use this as part of their decision. I am a little unclear on how this is calculated. Everything that I have seen online suggests that this is calculated by dividing total monthly debt payments ( secured and unsecured) by total gross monthly income, as opposed to comparing total debt to income. For us this makes quite a difference -

our monthly unsecured debts and mortgage payments comes to £1850 and our gross monthly income is £6600.

If we compare our monthly dent commitments with out gross monthly income, it looks like this -
£1850/£6600 = 0.28 x 100 = 28% Debt to income

If we used our total debt of 50k and compared that to our gross annual income it looks like this - 50k/80k = 0.625 x 100 = 62.5% debt to income


Does anyone know which criteria lenders will use?

ACG

Different lenders have different methods. It can make a difference as you say, so it is important to check.

raymond78

Is there an easy way to check which lender applies which method? Is there a list anywhere of more 'lenient' lenders???

thanks

ACG

Not that I am aware of.
We have something to give us a head start but it is just something we put together for internal use. Not all lenders will even disclose they have a debt to income rule on their website.

If you are not using a broker, I would make a list of a few lenders/deals when you are ready to apply and ring round. Deals change daily so the best deal today may not be tomorrow so no point setting your heart on a lender too early.