First Time Buyer - 40% LTV?

lizferris1984

First time buyer here - looking for some expert insight!

I'm currently in the process of placing my mortgage deposit money into savings accounts. I am saving with Skipton Building Society. I currently have a LISA and I have an appointment to open a 90 day notice account. My parents are contributing a large amount of money, the rest will be my own savings.

What follows is speculative figures. The lower estimate for total deposit is £70k. So, based on lower estimate, I would aim to buy a £130k house with a £70k deposit. So I'd need to borrow £60k. My salary is £16k. So I guess I am looking for a 40% LTV mortgage. My hope is that Skipton would provide this. If I end up with more money for the deposit, I'd like to look for a slightly more expensive house. So LTV I guess would still be 40%

Is it possible to get a 40% LTV mortgage, because the lowest LTV I usually see mentioned on MSE is 60% LTV? Is borrowing £60k achievable on my low salary?

So now the bad news: I have two defaults on my credit file, for £140 and £950. The smaller one is partially satisified/account closed. The larger one is in process of being paid. Both defaults are dated September 2017, so by 2021 will be 4 years old. I have no other issues on my credit file - no CCJs or bankruptcies, no missed payments, credit utilization ok, no other debt, debt to income ratio ok. Have been accepted for credit since defaults.

Will the defaults ruin my chances of getting a mortgage, based on the information given?

Should I give up on 2021 hopes and wait until the defaults have cleared in 2023?

Any information would be greatly appreciated.

anto164

Ltv is 'up to'. So when you get a mortgage, you would get that product but just borrow the amount ylu need. Dont feel that 60pc ltv means you must borroe 60pc!!

Also, dont forget youll need some cash for furniture / fees etc.

Ypull need to speak with a good mortgage advisor with tge defaults, it just means you wont get the best deals about for now.

getmore4less

Are your parents gifting the money?

lizferris1984

getmore4less wrote: »

Are your parents gifting the money?

They are giving me the money yes. So they don't want anything in return. They are despositing the money into my savings accounts over the next couple of years. Not sure it's "gifting" in mortgage terms, because I will have had the money in savings for a long while, before applying for the mortgage. So by then, I assume it would be considered my own money.

lizferris1984

anto164 wrote: »

Ltv is 'up to'. So when you get a mortgage, you would get that product but just borrow the amount ylu need. Dont feel that 60pc ltv means you must borroe 60pc!!

Also, dont forget youll need some cash for furniture / fees etc.

Ypull need to speak with a good mortgage advisor with tge defaults, it just means you wont get the best deals about for now.

Thanks for that reminder! I did realise I'd need extra money spare for those expenses, but didn't factor that into the above calculation. This is all very rough at this point, in terms of figures. I don't know exactly how much deposit will be. £70k is the minimum.

So do you mean I can go for any mortgage with a maximum LTV above 40% and ask for 40% LTV?

phillw

lizferris1984 wrote: »

So do you mean I can go for any mortgage with a maximum LTV above 40% and ask for 40% LTV?

Yes, the LTV is a cut off that you can't go higher than. If it was a lower limit then nobody at all would be able to remortgage.

Companies do have a lower limit they'll lend as a mortgage, but it's much lower than what you're borrowing. For example halifax require you to borrow £10,000.

In terms of furnishing etc, you can spend as little or as much as you want. I paid £20 for a 2nd hand chair and sofa, then I got a leather chair and sofa given to me. I spent a lot on a decent bed though.

spadoosh

Everything there sounds pretty doable. The defaults are unlikely to prevent you getting a mortgage just limit your options, ie you might (read probably) be paying more than you would without them but there lots of people who get mortgages with defaults on their file.

Obviously a lot can happen in two years so youll have ot see what its like then (im on about affordability, lenders willingness to lend etc). Applying isnt hard, and if you do get told no, it just means reverting to plan b and waiting a bit longer.

lizferris1984

phillw wrote: »

Yes, the LTV is a cut off that you can't go higher than. If it was a lower limit then nobody at all would be able to remortgage.

Companies do have a lower limit they'll lend as a mortgage, but it's much lower than what you're borrowing. For example halifax require you to borrow £10,000.

In terms of furnishing etc, you can spend as little or as much as you want. I paid £20 for a 2nd hand chair and sofa, then I got a leather chair and sofa given to me. I spent a lot on a decent bed though.

Thanks for the explanation. As a first time buyer you don't immediately think about remortgaging as it's further down the line, so it's great you've explained this. I appreciate the clarity, makes perfect sense.

I won't be spending a big amount on furniture - if anything. But it's right I need some money for fees, unforseen expenses, removal costs, and urgent repairs etc. I live in an unfurnished house, so all my furniture is my own already. I like a bargain too! Best buy recently was a new design, solid oak dining table and chairs, mint condition for just £80.

As for DIY I have done up 3 houses in the past. Years ago I was a local authority tenant (no more thankfully!) and a few of the houses I had were wrecks. Have done all kinds of decorating and so I'm confident with this. Will only pay contractors if it is really needed, can do any simple cosmetic work myself. I also know some local handymen.

lizferris1984

spadoosh wrote: »

Everything there sounds pretty doable. The defaults are unlikely to prevent you getting a mortgage just limit your options, ie you might (read probably) be paying more than you would without them but there lots of people who get mortgages with defaults on their file.

Obviously a lot can happen in two years so youll have ot see what its like then (im on about affordability, lenders willingness to lend etc). Applying isnt hard, and if you do get told no, it just means reverting to plan b and waiting a bit longer.

Ok - so if you're rejected and then apply for a different mortgage, will the rejection affect your chances next time? As with other credit applications, or does it work differently?

I appreciate the reassurance the defaults won't make things impossible! I realise it's not ideal, but I am sorting the rest of my credit file and my finances generally. So I am reducing monthly outgoings as much as possible, saving money each month, & paying off debt.

Does a lower LTV help with my application in light of the defaults?

Also - I have a question about disposable income assessment for mortgage applications. Am I correct in thinking my current monthly rent will be excluded from my outgoings, when they assess my monthly disposable income?

lizferris1984

spadoosh wrote: »

Everything there sounds pretty doable. The defaults are unlikely to prevent you getting a mortgage just limit your options, ie you might (read probably) be paying more than you would without them but there lots of people who get mortgages with defaults on their file.

Obviously a lot can happen in two years so youll have ot see what its like then (im on about affordability, lenders willingness to lend etc). Applying isnt hard, and if you do get told no, it just means reverting to plan b and waiting a bit longer.

Sorry for all the questions - just keen to work this out, but I realise it's a bit of a bombardment!