Anyone got accepted for a mortgage with big deposit but also poor affordability & unsecured debt?

SpencerH

In a bit of a pickle.  We ran up large debts doing renovations for our house which have paid off in that the house is now worth a lot more money and we have an offer on it.  It's at the upper end of the market and we have a lot of equity in the house to put towards our next home.  We have had an offer accepted on a property which is slightly less than we are selling for and have a 75% deposit to put towards it.  We just about make ends meet with all the unsecured debt and have never missed a payment on anything and both have credit ratings in the 900s.  We need to borrow about £20k less than we currently have outstanding.  However, the debts are restricting our borrowing.  Our broker has suggested we could commit to pay all of our debts with the equity at completion and get a bigger loan - which would work perfectly - if we can make it happen.  However, getting my bank statements together today I realised that I'm currently overspending by c.£100 per month - using our dwindling amount of savings to make ends meet.  Getting rid of the debt would free up about £800 per month between us - but I'm not sure how the underwriter will view it.  Will they look at affordability and automatically refuse or see the large amount of equity and the ability to afford the payments once the debts are gone and accept?  Are they more likely to reject outright or offer to lend a lower amount given the very low LTV and risk involved for the bank?  Does anyone have experience of a situation like this and successfully get a mortgage approved?

ACG

It sounds like you have a broker, trust them. 
There are a couple of lenders who need to be avoided, but in the main it sounds feasible. 

Thrugelmir

SpencerH said:

  However, getting my bank statements together today I realised that I'm currently overspending by c.£100 per month - using our dwindling amount of savings to make ends meet.  

Hence the reason lenders have an aversion to debt consolidation. Solves the problem but not the root cause.  Learning to budget is the place to start. 

K_S

SpencerH said:

In a bit of a pickle.  We ran up large debts doing renovations for our house which have paid off in that the house is now worth a lot more money and we have an offer on it.  It's at the upper end of the market and we have a lot of equity in the house to put towards our next home.  We have had an offer accepted on a property which is slightly less than we are selling for and have a 75% deposit to put towards it.  We just about make ends meet with all the unsecured debt and have never missed a payment on anything and both have credit ratings in the 900s.  We need to borrow about £20k less than we currently have outstanding.  However, the debts are restricting our borrowing.  Our broker has suggested we could commit to pay all of our debts with the equity at completion and get a bigger loan - which would work perfectly - if we can make it happen.  However, getting my bank statements together today I realised that I'm currently overspending by c.£100 per month - using our dwindling amount of savings to make ends meet.  Getting rid of the debt would free up about £800 per month between us - but I'm not sure how the underwriter will view it.  Will they look at affordability and automatically refuse or see the large amount of equity and the ability to afford the payments once the debts are gone and accept?  Are they more likely to reject outright or offer to lend a lower amount given the very low LTV and risk involved for the bank?  Does anyone have experience of a situation like this and successfully get a mortgage approved?

@spencerH Can't predict the outcome but assuming your broker picks an appropriate lender (one who will take the debt at completion into account for affordability and show a bit of common sense in underwriting), this should be doable based on the limited info in your post.

The underwriter may ask you to explain how the current debt was built up and as long as you have a reasonable and plausible explanation, it should be fine. Good luck!

lonibra

Thrugelmir said:

SpencerH said:

  However, getting my bank statements together today I realised that I'm currently overspending by c.£100 per month - using our dwindling amount of savings to make ends meet.  

Hence the reason lenders have an aversion to debt consolidation. Solves the problem but not the root cause.  Learning to budget is the place to start. 

Motherhood and apple pie.

I don't think "learning to budget" will get them the mortgage they need now.

And how is this debt consolidation given that they're borrowing 20k LESS than the current outstanding amount? I don't think you know what the phrase means.

Thrugelmir

lonibra said:

Thrugelmir said:

SpencerH said:

  However, getting my bank statements together today I realised that I'm currently overspending by c.£100 per month - using our dwindling amount of savings to make ends meet.  

Hence the reason lenders have an aversion to debt consolidation. Solves the problem but not the root cause.  Learning to budget is the place to start. 

Motherhood and apple pie.

Nah. It's that people are actually far more predictable then they possibly realise. 

K_S

Thrugelmir said:

SpencerH said:

  However, getting my bank statements together today I realised that I'm currently overspending by c.£100 per month - using our dwindling amount of savings to make ends meet.  

Hence the reason lenders have an aversion to debt consolidation.

@Thrugelmir This isn't debt consolidation The OP is using equity to pay-off debt and still end up with a smaller mortgage than they have now.

Typically, with regard to mortgages, debt consolidation is when borrowers move short term unsecured debt to their mortgage.