Mortgage and debt

Supernova101

Hi,
Any advice given will be greatly appreciated.
We would like to sell our house and move on but to move to the sort of property we require we would need to be debt free in order for our lender to lend the amount we require. We have about £20k worth of unsecured debt at the moment. Our house is worth around the £250k mark but we only owe around £120k. Is here any way you can get provisional offers as long as debt is cleared once your property sales? What I mean by this is we would use £20k from the equity to clear debts and use the rest for a deposit for the new property. I spoke to someone from Santander who was very unhelpful and said we would need to sell our property, clear debts and then we could apply for the mortgage? Any idea if this is correct? This would mean us renting short term before we could buy again.
I hope this makes sense and has not been answered too many times before.
Thanks

middleclassbutpoor

It doesn't sound right - I would imagine there would be a condition in the mortgage offer stating that the debts have to be repaid upon completion of the sale/purchase.

Could be wrong and things may have changed but it seems daft - where would you live whilst doing what they suggested.

Noobie2011

You are in a very similar position to what we were as in we had a property to sell and had around 22k of debt and were looking at a new property at 260k.

We were getting refused by the likes of Halifax so we decided to use money we got from the sale of our house to pay the debts off and then flew through with Halifax.

Plus when we applied with Halifax even though we had paid off the debt it was still on the credit files so when we did an AIP we marked them all as being paid off and also said this to the Advisor the same day with did the full application and went through fine.

Then on our Mortgage Offer it says in the condition part the following credit commitments must be clear before completion so all good as ours are already clear.

haras_nosirrah

some lenders take the pessimistic view that some people will say they will clear their debts but actually won't therefore will factor the debt in until it has been paid off and in some cases is also off the credit record.

In santander you have probably found the most pessimistic of the lot

Lots of others will do what you want.

Supernova101

Thanks for the reply. I’m a little confused with your process, did you sell your house then rent ? Or was you able to clear the debts the same day as you sold/bought your new property? This is all new to me so a little confused!

Noobie2011

Supernova101 wrote: »

Thanks for the reply. I’m a little confused with your process, did you sell your house then rent ? Or was you able to clear the debts the same day as you sold/bought your new property? This is all new to me so a little confused!

We were lucky as sold our house 1st and moved in with the In laws (still with them now until Sept!!) so could use the money to pay off the Debts before we got accepted with Halifax.

However that was only luck as up until then the gap between selling and applying for a Mortgage was delayed due to a useless broker.

The main point is though that Halifax were able to accept us by saying we would pay the debts off before completion. So I would give them a call and see what they say as hopefully they can do the AIP based on you will have paid the debts off before completion which gives you time to sell, pay debts and complete on new house.

A good way to tell would be go on their website and do an AIP online as only a Soft Search so does not impact you but it gives you an option on the debts to say if they will be paid off or not

Thrugelmir

Supernova101 wrote: »

I spoke to someone from Santander who was very unhelpful and said we would need to sell our property, clear debts and then we could apply for the mortgage?

There's a sea change with regards to unsecured lending. With the onus on lenders now to identify those in "persistant" debt. The spin off from this is going to be a tightening of more general lending criteria. Debt consolidation as a solution generally is not a recommended course of action for borrowers. Some lenders likewise may tighten their criteria down further. If it's a segment of the mortgage market that they aren't targetting for business.

amnblog

In Santander you spoke to one of the few Lenders that is entirely wrong for this situation.

Santander will count all debt they can seen on application against your affordability regardless of your intention with it - that is their policy - that is way their staff member was 'unhelpful'.

Use a Broker and all will be resolved using a more suitable lender.