Advice re mortgage after DMP?

spooney7

Hi there

I was hoping to get some advice from anyone who has personally been successful at obtaining a mortgage after completing a DMP. I understand that some of these threads can get a bit repetitive, so please feel to point me in the direction of a relevant thread if that’s more convenient.

To give some background, at the start of the year my fiance and I decided to rent my father’s house as he was going to move in with his partner. This was a better financial option for us, and would also give us a more relaxed living environment (ie, no more frequent agency inspections) which we wanted as we also found out I was expecting our first child (born at the end of October).

Sadly, my father passed away in July. We moved into the house a few weeks later, now with the intention of purchasing the house at a later date. The arrangement we currently have in place is that the money I would have paid my father in rent is instead paid to my sister (his executor) to be held for any major improvements required. The house itself could benefit from some updating, such as a new kitchen and bathroom, but a lot of the changes needed are mostly cosmetic such as painting the walls and clearing the overgrown garden.

I started a DMP in January 2016 as I had debts of approximately £9K from generally being irresponsible with my overdraft and credit cards. I have not missed a single payment for my DMP, and had paid off over half of it myself up until last month when I received an inheritance from both my father’s estate, and that of my grandparents after my grandmother died in May.

My DMP is now paid off in full and I have no other personal debt beyond my student loans. I also gave my fiance the funds to pay off his car which he had on finance and to clear half of his small credit card balance- to clarify, I was willing and able to clear the other half but he did not feel comfortable with that, which I completely respect. However, if it interferes with getting a mortgage, then I’m ready to broach the topic again.

We have treated ourself a little, but the overall deal is that I hold a 25% share of my father’s house which we are estimating to be worth around £60K, and I have the funds to put a further £10K towards a deposit meaning our deposit would be approximately 40%. We could do this comfortably with money leftover for fees and some property updates later on.

I am a civil servant currently on maternity leave, earning a gross salary of £20499. My fiance works in retail, and I would estimate his gross earnings to be £11-12K per year. I receive 6 months of full departmental maternity pay, after which the plan is that I will return to work and he will take the remaining 13 weeks as Shared Parental Leave. We have chosen to do this as it made better financial sense given that I am the higher earner, but will also give him the one-to-one time with our son as well.

Sorry, I seem to have rambled quite a bit! I guess my first question would be how long should someone wait after ending a DMP before applying for a mortgage? And how long will it take for my credit score to start improving? I am registered with both Credit Karma (score 521) and Experian (score 612), so I understand it takes time to build back up. I’m not sure of my fiance’s Experian score, but I know his Credit Karma score is also 521. He previously filed for bankruptcy, but this has been discharged for nearly a decade. We are both well aware that we will pay a higher interest rate for a mortgage, and want to look at all viable options to be as financially responsible as we can.

If anyone could advise me on their experience of applying for a mortgage after a DMP, I’d be very grateful. We have been given the number for a local financial advisor who I plan to call in the New Year, but a firsthand account would be really helpful.

foxy-stoat

If the value is £240,000 and you have 25% share on the title deeds (£60,000) and another £10,000 then its more like a 29% deposit, not 40%, unless my calculator is brokened.

Even at 4.5 times total gross salary I cannot see you be able to borrow enough to buy it, let alone just completing a DMP.

Maybe save up for 2 or 3 years and see where your salaries are then.

Caz3121

spooney7 wrote: »

I hold a 25% share of my father’s house which we are estimating to be worth around £60K, and I have the funds to put a further £10K towards a deposit meaning our deposit would be approximately 40%.

do you mean the property value is £60k and your 25% would be £15k so with your £10k you would be looking to borrow £35k?

Yalpsmol

Is there a reason your partner doesnt work full time? Is he making any contribution in any of this? If the house is 240k and you need a mortgage for 170k that is going to be tight on your incomes.
We have a similar sized mortgage (with combined earnings ~45k) and on my 20k income (with no kids) I do have to scrimp and save to afford it. You need to think about what you can genuinely afford as well as what a bank will lend (its their job to also assess affordability but people still often over commit themselves).

Yalpsmol

I cant edit my post on my mobile. Just realised 60k might be the total value. In which case ignore me, obviously a 35k mortgage is way more affordable!

spooney7

Sorry, I should have been more clear!

We are estimating that the house itself is worth £60K, so my share would be £15K. Of course, we would need to have the house properly valued, but our estimate is based on average prices for similar houses in the immediate area, with a reduction to take into account the need for future replacements for the kitchen and bathroom.

With the additional funds available for a deposit, we would be looking to buy out my siblings share of the house with a mortgage of £35K required. I have looked at mortgage calculators online that have estimated that we would pay around £250-300 per month for a 15 year term mortgage at a rate of 6%. Obviously we would like to pay a mortgage off as soon as possible and are now in the fortunate position to do so in even less time, but at this point we are just looking at obtaining the mortgage to begin with.

My fiance works 4 twilight shifts per week, with his hours averaging around 25 per week. We split our expenditure based on percentage of earnings, and we are happy with this arrangement as his hours work well for us when caring for our son while remaining financially stable.

MovingForwards

Speak with a whole of market adverse lender to see what your options are.

Hopefully ACG will see your post and pass comment.