Can I get a new mortgage whilst on a DMP?

lonely_2

Hi there,

Can anyone help me? I am looking to move house next year but I'm worried about not being able to get a new mortgage. I already have a mortgage of £185K on a flat that's worth at least £380k (this is with Nationwide). Trouble is we're looking to buy a family sized house for around £400K but I have a debt management plan with Payplan for around £45K. My husband doesn't know about this arrangement and ideally I would like to keep it this way, as I am managing with the repayments and I don't want to have to deal with the guilt and shame that will come with him finding out.

Can anyone suggest the best way to move forward? Should I look at specialist brokers? I don't want to pay the earth for a new mortgage. My current apr is 5.7% on a two year fixed rate (this will end next year).

Thanks for any advice!

luckyfool

Lonely,

I'm not sure how realistic it will be to hide the situation from your husband as Nationwide will be unlikely to assist with the new mortgage due to your credit history so you cannot "port" the mortgage. This means a penalty would be payable to redeem it and presumably your husband might be concerned to find out why Nationwide would not help?
Your current deal is likely to be fixed at 5.7% ending next year, probably with an APR that is somewhat higher.

When you went into your Payplan debt management, plan the constituent parts (the individual credit cards or loans) have agreed to accept a reduced amount on an ongoing basis towards the debt, possibly to suspend any interest, and presumably to defer taking any legal action as long you maintain these payments. Unfortunately this does not detract from the fact that you will not have kept to the initial contractual terms of the debts and these providers will normally have communicated this fact to the credit reference agencies (normally by showing your payments as getting further and further behind the contractual payments over a period of time until they show as defaults). Normally 6-12 months into a DMP most if not all will show as status D, or defaulted on your credit file.

Almost unavoidably this is going to have an impact on the products open to you, though one or two lenders can consider defaults on their standard ranges, (e.g. Chelsea Building Society will look at up to £3,000 in defaults as long as they are satisfied before completion).

A good first step would be for you to request a copy of your statutory credit file from Equifax and Experian, this would cost about £2. Experian reports can also be obtained through creditexpert.co.uk on a subscription basis with a 1 month free trial which you may prefer. This will allow you to see exactly what is showing up on your file and if you show it to a good mortgage broker they will be able to assist you in interpreting it.

Certainly in this type of scenario the first thing I would do is run an Experian check, I would probably expect to see £5-10k+ in defaults on the file, having said that if you setup the DMP promptly and maintained it then there should not be any CCJ's, and assuming the mortgage has been well maintained then you are still in a pretty strong position given the amount of equity you have and should be able to access a reasonably decent deal. The most suitable deals will depend on your exact circumstances, how long the DMP has been running and how recent any defaults (if any) were registered.

Assuming you sell your current property (and in redeeming the mortgage before the end of the fixed rate there would likely be a penalty) then you should be looking at around 60-65% for the new purchase which is pretty low risk for lenders to look at. With that in mind you could be looking at fixed rates at around 7%.


Hope this helps

homer_j_3

Just to add that would be at current rates.

I understand that you feel that you need to hide this from your OH to protect them but I would just say that you really should consider dealing with this matter well in advance before you start looking for houses.

I am sure they will be able to cope and adjust with the news that you tell them a lot easier then when it inevitably comes out after you have lied and deflected questions to why you are paying 2/3% above nationwide rates etc.

With the pressure of selling and buying added into the equation, it will be a lot more hurtful and devastating than it would if you came clean now before plans are made under false understandings.

When I have seen this happen in the past, it usually turns out that the person who finds this out, doesn't accept that they were lied to to protect them but they were lied to because the person lying couldn't tell the truth and trust the other person with this information. Not saying that this is why you are doing it but just saying that when it does come out in the wash, as yourself whether they are likely to be more hurt finding out this way than you offering the information at a stage where money has not been spent, expectations risen etc.

Bun

Hi there,

Ignoring the mortgage angle slightly, would it be possible to clear these debts with some of the capital from the flat, as if you are only looking to increase the mortgage by £20,000, presumably this will be affordable. I wouldn't normally suggest securing debts, cut you will then have everything out in the open, and it will be cheaper (less any fees obviously) to pay this money back into the mortgage as overpayments. May mean a lower interest rate overall.

Good luck with whatever you decide, but having been on the (albeit well intentioned) end of finding out about undisclosed debt, finding out about it when being turned down for a mortgage will have more far reaching consequences than researching all the options now and finding out how you can come out of it more easily.

lonely_2

Thank you for all your advice. It really was very helpful.

Unfortunately there is no way I can tell my husband, I’m sure everyone thinks that, but in our relationship I’m regarded as the one who is sensible and good with money. I wouldn’t like to think of the consequences if I came clean, so in a way I’m really asking for advice on how I can continue to keep this charade going. Neither do I want to look into paying off my debt with the equity. There are a few reasons: firstly, this is my mess not my husband’s so I don’t want it secured on a joint mortgage; secondly, on the dmp all the interest has been frozen thereby allowing me to pay it off quicker (I know the downside is that my credit rating is shot to pieces but I can live with that); and, finally, if we move we need all the equity we have to move to a bigger property and start a family.

I know you mentioned that Nationwide would be unlikely to “port” the mortgage – by that I’m assuming you mean that they would not allow me to transfer it from one property to another. However, I started this dmp in February and my 5 year fixed rate deal came to an end in June. That’s when we extended it for two years with a new deal. I’m assuming they did not need to do a new credit check and (maybe foolishly) I was hoping they would not do a new one when we asked them to transfer it from one property to another.

There are a couple of specific questions I need help with and, again, any advice would be greatly appreciated –

If I wanted to avoid extending the mortgage and just concentrate on moving it from one house to another with Nationwide, what would my budget be? As I said before the mortgage is £185k, the flat has the potential value of £400k. Am I being unrealistic to leave just £20k for all related costs (solicitors, surveyors, stamp duty, etc.) and look for a house worth £380k?

If we did need to extend the mortgage, is it possible that I could leave my mortgage with Nationwide untouched but take out a second mortgage with a specialist lender to pay the difference?

poppy10_2

There's no way you will be able to do this without disclosing the debt to your husband.

luckyfool

When you switched products without further borrowing then Nationwide do not do a credit search. Check with Nationwide, but I'm virtually certain that they will credit search you when you apply to port the existing mortgage, even if you do not increase the borrowing. If they do then I suspect that you will have problems as Nationwide are notoriously very conservative on issues like this. Again, do double check by phoning them up and running the scenario past them but I don't think it will work.
-

£20k sounds about right, though you may want to build in a little slack and allow for not achieving your preferred price on your property. £12k stamp duty, £2,500 for legal fees sale and purchase, Estage Agency fees + removals etc. I would err on the side of caution and maybe go with £25k?
Also remember if Nationwide can't port the mortgage then you would have to allow for the penalty on redemption.

lonely wrote: »

Thank you for all your advice. It really was very helpful.

Unfortunately there is no way I can tell my husband, I’m sure everyone thinks that, but in our relationship I’m regarded as the one who is sensible and good with money. I wouldn’t like to think of the consequences if I came clean, so in a way I’m really asking for advice on how I can continue to keep this charade going. Neither do I want to look into paying off my debt with the equity. There are a few reasons: firstly, this is my mess not my husband’s so I don’t want it secured on a joint mortgage; secondly, on the dmp all the interest has been frozen thereby allowing me to pay it off quicker (I know the downside is that my credit rating is shot to pieces but I can live with that); and, finally, if we move we need all the equity we have to move to a bigger property and start a family.

I know you mentioned that Nationwide would be unlikely to “port” the mortgage – by that I’m assuming you mean that they would not allow me to transfer it from one property to another. However, I started this dmp in February and my 5 year fixed rate deal came to an end in June. That’s when we extended it for two years with a new deal. I’m assuming they did not need to do a new credit check and (maybe foolishly) I was hoping they would not do a new one when we asked them to transfer it from one property to another.

There are a couple of specific questions I need help with and, again, any advice would be greatly appreciated –

If I wanted to avoid extending the mortgage and just concentrate on moving it from one house to another with Nationwide, what would my budget be? As I said before the mortgage is £185k, the flat has the potential value of £400k. Am I being unrealistic to leave just £20k for all related costs (solicitors, surveyors, stamp duty, etc.) and look for a house worth £380k?

If we did need to extend the mortgage, is it possible that I could leave my mortgage with Nationwide untouched but take out a second mortgage with a specialist lender to pay the difference?

luckyfool

Lonely,


With regards to your situation I have spoken to a Nationwide underwriter based on hypotheticals. They would definitely credit search you on a porting case (even if just borrowing the same amount) and the system is likely to decline you automatically if there are issues showing up relating to unsecured credit. However, as a ray of light she did advise that they might consider an exception if you are not borrowing any additional money and might be willing to do the deal on an appeal to a specialist underwriter. I would still say the chances are that Nationwide wouldn't do it, but there is a 1 in 3 or 4 chance that they might so it would definitely make sense to try that route first.

Hope this helps

cheers

Luckyfool

gpaul49

great advice you could also try to aske for a settlement with your creditors
i going to try that one as well