Mortgage application & big payday loan history

RyanT1992

Hi, 
I'm a first-time buyer in a bit of a tricky situation with regards to my credit history, and wondered if anyone could help?
I'm buying with my partner in the next year
- Both credit ratings good (I know it means nothing)
- Combined salary of £80-85k (expecting payrise before then), in full-time permanent jobs (Marketing & Private Nanny)
- 10% deposit
BUT
- I had a serious gambling problem (100+ payday loans over the past 6 years)
- Most of them 2018 or before
- By the time we apply for a mortgage, I won't have had any loans in the past year (nearer two years) or gambled in two years

Will we struggle to get a mortgage? And if we can get a mortgage, do you think we'd be able to borrow 4.5x our salary, or will it likely be a much lower multiple? We're buying near London, so obviously every penny helps massively in that respect...

I just want to set our expectations somewhere near reality, as the online mortgage calculators don't bring into account the payday loan history (and I won't go for an AIP until it's been at least a year since last payday loan) - the online tools say we can borrow anything from £250-400k, which is just not helpful at all!

Thank you in advance to anyone who can help!

Sotts

I would suggest you talk to a broker.  They'll have access to lenders that deal with poor credit.  The PDLs will be an issue but the right broker will let you know where you stand

RyanT1992

Thank you, I'd be looking to do that nearer the time, just wanted to have an idea of how much/if we can borrow beforehand (I understand that there's no magic formula, but as I laid out my finances & history, was hoping there'd be someone who could give a rough guess. 

ACG

2 years without PDLs should be ok with a lot of lenders. You have broken the cycle that concerns lenders. 

Some lenders say none in 6 years, others say none in 12 months. You probably dont NEED a broker, but they will help avoid the lenders who wont accept you. 4.5x income should be possible but subject to other affordability checks.

RyanT1992

ACG said:

2 years without PDLs should be ok with a lot of lenders. You have broken the cycle that concerns lenders. 

Some lenders say none in 6 years, others say none in 12 months. You probably dont NEED a broker, but they will help avoid the lenders who wont accept you. 4.5x income should be possible but subject to other affordability checks.

Thank you very much for the reply, really puts my mind at ease. We’ll be holding out until after Coronavirus has settled down, as our deposit is only 10%. What are the other affordability checks? We don’t spend a huge amount on anything and will cut down in the build up to going for a mortgage, so the bank statements look cleaner. 

Carl2510

Is there no chance you can do better than 10%? 15% I reckon at the least will do much better for you.

RyanT1992

Carl2510 said:

Is there no chance you can do better than 10%? 15% I reckon at the least will do much better for you.

We can, but means another 6-12 months of saving, which, considering I’ve lived with family for 7 years of my adult life, I was hoping not to have to do... If we’re looking at a £400k property, is an extra £20k savings, which is a huge amount. Do you think that post-pandemic, we’ll struggle to get a 4.5x mortgage at a half decent interest rate in our 10% situation then? I presumed that post-pandemic, the mortgage market would return to what it was a year ago. Also, does 11% make a difference, or is it only 5% increments? 

moxxey

RyanT1992 said:

Carl2510 said:

Is there no chance you can do better than 10%? 15% I reckon at the least will do much better for you.

We can, but means another 6-12 months of saving, which, considering I’ve lived with family for 7 years of my adult life, I was hoping not to have to do... If we’re looking at a £400k property, is an extra £20k savings, which is a huge amount. Do you think that post-pandemic, we’ll struggle to get a 4.5x mortgage at a half decent interest rate in our 10% situation then? I presumed that post-pandemic, the mortgage market would return to what it was a year ago. Also, does 11% make a difference, or is it only 5% increments? 

The difference between 10% and 15% is really in the interest rate and a lender's likelihood to offer the full mortgage you require. Lenders are really tough at the moment. I'm going through weeks of checks and have a 40% deposit.

Could you not potentially borrow from family, to secure a higher deposit, then make sure they are paid off over the next 6-12 months? ie. if you can afford to put aside enough money to move you up to 15% through savings, simply ask them if you can secure the extra 5% and make sure you pay them instead?

RyanT1992

moxxey said:

RyanT1992 said:

Carl2510 said:

Is there no chance you can do better than 10%? 15% I reckon at the least will do much better for you.

We can, but means another 6-12 months of saving, which, considering I’ve lived with family for 7 years of my adult life, I was hoping not to have to do... If we’re looking at a £400k property, is an extra £20k savings, which is a huge amount. Do you think that post-pandemic, we’ll struggle to get a 4.5x mortgage at a half decent interest rate in our 10% situation then? I presumed that post-pandemic, the mortgage market would return to what it was a year ago. Also, does 11% make a difference, or is it only 5% increments? 

The difference between 10% and 15% is really in the interest rate and a lender's likelihood to offer the full mortgage you require. Lenders are really tough at the moment. I'm going through weeks of checks and have a 40% deposit.

Could you not potentially borrow from family, to secure a higher deposit, then make sure they are paid off over the next 6-12 months? ie. if you can afford to put aside enough money to move you up to 15% through savings, simply ask them if you can secure the extra 5% and make sure you pay them instead?

Wow, I’d have thought they’d be welcoming you with open arms with a 40% deposit! We’ll be waiting until the pandemic is over anyway, hopefully the market will be better then and 10% will be okay. If not, we’ll just have to save for a bit longer, as family don’t have any money, sadly. Hopefully there’s a little house price crash too, but can’t get everything you wish for!

strawb_shortcake

Its probably going to be 6 months before we start to see the pandemic and the restrictions really start to ease, then you are looking at maybe 3-6 months to find and buy somewhere so it does seem to tie in with your savings timeframe to get that extra 5%

RyanT1992

annabanana82 said:

Its probably going to be 6 months before we start to see the pandemic and the restrictions really start to ease, then you are looking at maybe 3-6 months to find and buy somewhere so it does seem to tie in with your savings timeframe to get that extra 5%

Thank you, I guessed that timeframe too. Not sure what’s happening with the house prices though, seems everyone is predicting different things, so hard to know when to buy!