Moving house with £40k debt?

seriouslyunsurprising

I already know this isn't the easiest mortgage to place, but we weren't expecting to move for another 2.5 years and this house just appeared from nowhere.

Our house is worth min £250,000, with £102,000 equity. We earn £50,000 between us. 2.5 years in to a 5 year fix with First Direct who have said due to our current debts we cannot borrow anymore.

We borrowed £40,000 to fund renovations and have paid £25,000 of this back over the last 2.5 years - so just less than £15,000 of this remaining on 7 different credit cards spread between the two of us (used MSE money transfer trick to get the funds). It was always the plan to have this paid off by the time the mortgage fixed period ends in 2021, and we're still on course for this.

We also have limited company which we are directors of, and we took out 2 x £8,000 loans earlier this year which we then lent to the company as directors' loans, and also money transferred £8,000 in another director's loan. So the company owes us £24,000, but obviously this is in our names so in the mortgage company's opinion they just see us as having almost £40,000 total debt between the two of us.

We have come across an amazing house that has prompted us to consider moving and not sticking to our plan. It is on for OIRO £280,000. After 2 hours on the phone with FD today they said they can't give us any further lending due to affordability, so we are faced with either only being able to offer maximum £240,000 on this house (to give us £10,000 to cover estate agents, legal fees, stamp duty etc on the new house) or sourcing a mortgage from a different lender (which will incur £3,000 in early repayment charges from FD but we will take the hit if it is possible).

Any wise owls on here able to advise whether there might be another bank who would consider lending to us, or if there is a particular broker we should try?

Thank you for reading if you got this far, and thanks in advance for any advice (even if that advice is 'Stick to your plan, you've no chance of getting a mortgage for the house")

YHM

Honestly? You are going to struggle based on them figures.

Your debt to income ratio (a key consideration to a lender) is very high. Lenders will account for significant unsecured debt in the background and this will impact on your assessment heavily.

It may be best to look to use some of that equity to pay off your debts and reduce your deposit accordingly. If all your debts were paid off, you may be able to borrow close to 200 / 220k, which with a smaller deposit (45 / 50k) may bring that property closer to your reach.

I would advocate finding a broker that can support you in more detail.

Thrugelmir

Why has your business required you to inject £24k of cash?

seriouslyunsurprising

Thrugelmir wrote: »

Why has your business required you to inject £24k of cash?

We have invested in 3 new vehicles for the business this year

Thrugelmir

seriouslyunsurprising wrote: »

We have invested in 3 new vehicles for the business this year

Is your income derived from the Company. The opening post isn't clear. By the sounds of it, the Company is substantially more than just a hobby business.

seriouslyunsurprising

Thrugelmir wrote: »

Is your income derived from the Company. The opening post isn't clear. By the sounds of it, the Company is substantially more than just a hobby business.

Apologies, I should have been clearer. My husband works FT earning £32,000 but is also 50% shareholder and director in my business. I take a salary of £18,000 per year from the company which is my sole income (I can and will earn more in a few year's time, taking a back seat due to small children). My job allows me to avoid paying for childcare

onlyfoolsandparking

How ironic, similar thing happened to me about 10 years ago, similar debt, own business, similar equity and we found our dream house, 350k farmhouse it was stunning, cut a long story short we got the funding for it but lost the house, usual gazumping BS wife was heartbroken but found another house which was not as big but only 260K.


Having spent 10 years here now I can tell you it was the best move I ever made, that more expensive farmhouse / mortgage would have killed me and every time I drive past it now I have a little smile.


I know this has got nothing to do with nothing lol but what I am saying is if your meant to have that new house you will get it, if not be happy it could be a blessing in disguise

bigstevex

I'm pretty sure I read somewhere that some (not many) lenders will class the debt as belonging to the company if you can prove its been used by the company even though it's in your name.


One for the brokers whether I'm right or not in saying that, just seem to remember seeing something about that recently?

seriouslyunsurprising

We've since spoken with a broker who have suggested Aldermore - apparently they'll be happy with only one years accounts for the ltd co, accept the credit cards settled on completion and lend us up to 200k which will allow us to buy the house.
The only catch is it's 2.68%

Any experiences with Aldermore? Just about to search the forum. To any brokers our there- is this likely our best option?

Thrugelmir

seriouslyunsurprising wrote: »

The only catch is it's 2.68%

That's far from prohibitive.