Mortgage success with bad credit

Callum1984

Hi,

Long time reader on here but this is my first post!

Just wanted to share our experience with getting a mortgage with bad credit........it is possible after all. Just a bit of a back story I have bad credit and my credit file wasn't a good read when I first logged on. I had been on a DMP for 6 years and had missed a few payments in the past with it, I had a total of 6 creditors totalling £14k and 4 defaults dated 5 years ago and 2 3 years ago, 1 late payment on my mortgage (1 day late) 13 months ago. My wife has pretty good credit but she also had a few late payments on store cards 2ish years ago. My credit score was 680 and wife's was 910. We had a lot of equity in our current home and want to move into a bigger house and clear all debts when we moved. We found a new build and fell in love with it, but I thought we would have to wait another year when most my defaults were no longer visible, but after speaking to a MB he told me about aldermore. We got a DIP and then reserved the house, we then submitted the application along with any relevant paperwork they would need. From submitting to getting our mortgage offer it took 5 weeks, but I was assured all the way through that there would be no problems and they just underwrite everything so they are always longer than high street lenders. We are now over the moon and looking forward to moving and being debt free.

House price £369995
Help to buy £73999
Deposit £45000
Mortgage for £250k
Joint income of £57k
Interest rate 3.78

Hope this helps anyone thinking of getting a mortgage whilst on DMP or with bad credit

startingout2016

Thats brilliant that you got your house.
The interest rate seems high though and on a standard 25 year mortgage you would be paying nearly £1300 per month.
With help to buy do you then pay per month towards the loan too?

The figures seem expensive to me only because we earn similar amounts and have a mortgage of £850 pm and its still tight at the end of the month.

Callum1984

It is higher than we would of liked but given my credit file it was as good as we was going to get. We took it out over 34 years so works out around £1100 a month for the next 2 years. In 2 years time we will be able to go to a high street lender and will be paying less and be able to reduce our term. Other than the mortgage we don't have many other outgoings so is affordable and can still save a sizeable amount each month.

The help to buy doesn't kick in until year 6 by which point we should have the money to pay it off.

Dandytf

What an amazing example well done OP!
Maybe others including myself have something to look forward to in future.
I have told myself I'm restricted to current mortgage provider for a few years yet at least until my sc dmp finishes hopefully 2021 or 22.
Maybe just maybe there could be alternative providers I could approach when current fix finishes 2019 -as I would grab any opportunity to reduce my term if possible.
OP thanks for sharing positive news!

[Deleted User]

Congratulatons OP! That's great news!

Effectively they had a <70% LTV because of the Equity Loan & your deposit, which no doubt helped. Although in effect YOU are borrowing @ 88% LTV (give or take), to the lender, it's only 68% so they're pretty content they're going to get the money back.

Interest rate doesn't seem too bad considering everything - hopefully you can remortgage away in 2 years to a lower rate. That's my plan with mine (something like 4.49% initially for 2 years).

Only thing to possibly note, is that some lenders won't accept a remortgage where the equity loan will remain in place after completion (e.g. to another equity loan product) - because after Year 5 the costs start creeping up. That potentially will limit your panel of lenders, as some would expect the remortgage to be paying off the equity loan. Failure to pay off the equity loan by say year 8 or 9 can substantially affect outgoings - they don't want to take that risk.

I find the following very useful. Obviously some assumptions are made about RPI etc, but it goes from £140p/m @ Year 5 to £195 3 years later.
https://www.themoneycalculator.com/mortgages/calculators/help-to-buy-repayment-calculator/#!/dealfinder/mortgages/

If you wanted to remortgage AND pay off the equity loan (which I assume a lot of people do, to avoid the fees in Year 5) that would effectively take your mortgage to approx 85% LTV (assuming no overpayments and no dramatic rise in value).

Certainly not impossible, but something to be aware of if you weren't already.

Potentially a product switch with the same lender could be easier (e.g. onto another fix for 2 years), get the LTV down a bit more THEN remortgage away.