1st Time Buyer - With Debt!!

vincent_2

Hi,

I am currently looking to get on the property ladder (at the age of 34!!) and I am just wondering how much the debt that I am in will affect my chances of securing a decent mortgage and if there are any lenders out there, that would incorporate my debts into the mortgage (if this is possible?).

I have a loan with northern rock of £14184 (8.8% apr) over a 78-month period, which I started paying up in May 2004 at £237.28 a month. There is no redemption penalty with this loan. I also have debt on my two credit cards to the amount of £3000 which I am not paying interest on (thanks Martin) which I pay about £100 a month to.

My salary is just under £30000 pa. So going by what I can gather, if I had no debt, I would be able to get a mortgage of about 3.5 * £30000 = £105000.

A relative has kindly agreed to lend me £5000 for a deposit on a property.

I am hoping that I will be able to go for a property at about the £80000 mark but I am not sure if I am being a bit optimistic!?

Does anyone know how this debt will affect my mortgage amount and which lenders may be best to go to with this amount of debt?

Any information would be much appreciated.

Thanks,

Vincent

Mortgageman

Many lenders will subtract monthly payments from incomings and use this to calculate your borrowing level.

Have you kept up your payments?

You could, theoretically roll up your debt, but there are a number of issues with this, by increasing the loan to over 100% of your mortgage you will narrow your options greatly, and long term (mortgage) debt will probably be mroe expensive than shortt term debt.

MM

martinhp

You shouldn't have a problem.

£30,000 - £4644(annual debt payments) = £25356 x 3.25 = £82407 Mortgage

With a good credit score most lenders will take you on. With a 5% deposit make sure you use a lender that doesn't charge a MIG (Mortgage Indemnity) fee. this could be anything between £1000 - £1400 e.g. Nationwide, Standard Life or IF

Mortgageman

With a 5% deposit ......

but make sure you understand that this doesn't mean a 5% deposit to get the property, and then a 115% mortgage (to cover the 95% against the property and the further debts) - if you buy a house for £80,000, and take up your relatives kind offer, you will need a mortgage of £75,000 - as MartinHP says, this is achievable.  

Trying to consolidate your debts at the same time makes it much harder (and is perhaps not the right thing to do anyway)

Robert_Sterling_3

Martinhp:-
Are Nationwide etc the ones to beware of or the one's that do not have an MIG charge.
Last time I dealt with them they both did have one or did not have one depending on which way you look at it.
a) They did not have one.
b) They charged a higher rate if you had a higher loan to value mortgage.

I have just checked out Nationwide.

They have different rates according to whether you pay 5% or 10% deposit.
By doing this they avoid calling it an MIG
A rose by any other name ...


"Nationwide proud to be different"  

martinhp

sorry for not making it clear :-[ Those lenders DO NOT charge a MIG fee

vincent_2

Thanks for the information guys. It is defiantely not as bleak as I first thought. My credit rating is good so going by the info I have got from this forum it looks like things should be ok.

Cheers

V

hopefulfooluk

I always thought that to work out the amount they will lend you, they subtract the *outstanding* amounts of debts from your salary, not just what they cost per year. So therefore if you go to a lender that will give you say 3x your salary, earning £30,000 but with £17000 of debt, they would dock the £17k leaving you with £13000x3 = £39000.

It certainly worked like that when I took my first mortgage out.