Good equity, large debt

Citizen_Kanes_Abel

Hi,

Due to debt i'm looking to downsize significantly - I just want to get a basic understanding of how it all works first, I know I need to speak with a mortgage adviser but won't find the time for another week or two.

I'm looking like anything between £80k-£100k equity on the house but approx £45k debt (including a large help to buy scheme), any ideas how things work please?

Do I approach them and any new mortgages are all worked out on the guarantee all debt is cleared with the equity, is it as simple as that? I get such and such for the house, existing providers give me £90k and I can get guaranteed rates on a new home on the proviso everything else is cleared?

Unsure if this is the best forum or the selling house one.

Cheers

[Deleted User]

There are usually 2 groups of lenders when it comes to repaying debt

1. Lenders that will work out your affordability and give you a mortgage offer on the basis of you repaying your debts.

2. Lenders who have done their research and know that very few people who say they will clear debt will actually do it. These will work out your affordability based on what it on your credit file as of date of application

In theory lenders in group1 will be better for someone downsizing to clear debts. But there are some lenders in group2 who are less strict about debts and have higher multiples so can still lend enough even factoring in the repayments.

Any payments to help to buy or mortgage or anything will be excluded from calculations in both groups. I am only talking about unsecured debt

Citizen_Kanes_Abel

Ok, there's no way I could get back onto the ladder or be accepted without clearing the debts, alot of this is down to going from dual income to a single income.

Part of me wants to just sell up , clear debts and have a break of owning a home (so i'll be debt free before even reapplying) but I understand this might not be wise as rent is always dead money.

I presume the mortgage broker/adviser searches both sides of the fence you've mentioned? Is one 'type' more common than the other? As I say I think only way I get a new mortgage is option 1

[Deleted User]

Yeah of course, we do a fact find and take details of all your outgoings and commitments. Sometimes a credit report is the easiest way to get everything in one place but credit card statements can be good as well.

Once checked against income levels its usually a case of finding out which lenders is going to be the best fit. Sometimes it is based on personal experience of cases going through smoothly and without hassle, sometimes its purely a case of which case hits the affordability calculations.

As far as which lenders are in group 1 and 2. Its a real mix. I'd say off the top of my head that there are probably more lenders in group2 but i dont think its by a massive amount. There are high street/ prime lenders in both groups though.

Sometimes a drastic fresh start is whats needed but I agree that coming off the property ladder is less than ideal.

Kane_Ashwood

But isn't my credit file poorer when Ive still got the os credit than when it's cleared?

I think part of this is daft pride, going to ask for a new mortgage when you're saying by the way I built up £45k debt.

I forget I have so much equity in that sense I guess