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Ways to improve our chances to get better mortgage deals in the future

gyorfitam
gyorfitam Posts: 35 Forumite
Fourth Anniversary 10 Posts
edited 31 May 2020 at 7:00AM in Mortgages & endowments
I would like to get some tips on what could improve our chances to get better mortgage deals in the future.
To summarise the (potentially) key factors:
  • We are a couple, she has a 10 years old kid from a previous marriage, they are already divorced and only the child part is left, they should be over in few months.
  • We are not British citizens but both are eligible to get the settled status - I already received it, she is just applying for it now. Same situation with the electoral roll. So we live here for a while but we are not exactly familiar with certain things and these certain things can be drastically different from how it is in our country, so please don't be too harsh if something is not obvious for me :smile: .
  • Both of us has a job at the moment but got furloughed like many other people and we are quite unsure if we will still have these jobs after the summer ends. We both have the plan to build our own little businesses, I am actively working on building mine, she is still studying in college and supposed to finish this summer but because of the situation, we just simply don't know when she can actually finish. But she could start to earn money with her previous profession if things are going back to (more or less) normal, so probably within few weeks/months.
I couldn't really find information on what's the best practice for sole traders to build credit history and to strengthen their position in the eyes of potential mortgage lenders. Any advice on this one? According to my current boss (he was quite cynical but I guess there is something in what he is saying), it's possible that even my employee (if I would have one) would be in a better situation in terms of mortgages than me because that person has a "more reliable income" than me (assuming that I can earn quite good money so I am actually able to afford to have an employee, increase the capital of the business regularly and pay myself more than an average salary at the same time).
I ordered my first credit card in last August, recently got a second one and so far paying it back in full. Is there any other way to build credit history? Car loan, personal loan? Naturally, I wouldn't really use these loans because I don't really need them but I have the impression I have to use them so I can have a better mortgage deal at the end (this is quite different from my country's practice). Any thoughts on this?
My partner's parents bought a house quite recently and we realised that they are paying less for their mortgage than what we pay for our rent (15 years mortgage on a house that worth more than our flat). I tried to get some information on exact numbers but for some reason it was not really possible to discuss details with them (maybe it's a cultural thing for them to not discuss finances with others so I only have second hand information from my partner). But what I know, they tried to pay as much as they could in the first 2 years but it was not really clear why. It would be interesting to know but I'm not even sure if they even knew what they were doing and not just brainlessly following the advice of a mortgage adviser or something. Any thoughts on this?
My current boss is an accountant and he advised me to check out interest only mortgages if we are not planning to move in the very first home we buy. His theory is this if I understood right (with fictional numbers):
  1. Pay £20 000 deposit, borrow £180 000 (that's more or less what we are looking for, it could be a little bit higher than this)
  2. Pay the interest for 10-15 years, the monthly payment should be much less than what we pay for rent now (after checking a calculator, it shouldn't be more then 30-35% of our current monthly rent)
  3. Sell the property for around £400 000 (according to the statistics I saw, on average, property prices doubled in every 10-15 years in the last like 50+ years), pay back the whole mortgage, use the remaining money (like £200 000) and the 10-15 years worth of saving (should be at least £60 000) to use it as a deposit for a new property (or properties if we would like to invest, not just buy)
Is there anything in this plan? Is it realistic, doable? Any alternatives that could work? Any other things to pay attention for?
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