Mortgage with bad credit, any chance?

Kendowned

Hi, I haven't posted on the forum for a while but had to dig out the old account, I'm hoping I can get some advice on my current situation.

last year I started a DMP which I have been paying off slowly I had around 20k worth of debt but after a voluntary termination on my car and my payments so far I'm down to around 10k. my plans were to pay off my DMP within 5 years and look at getting a mortgage around then with the money I'm saving in a  save as you earn scheme with my employer while paying off my DMP.   Today my partner had an offer from her family to give her some money towards a deposit but with my credit history in tatters, I'm not sure how realistic this will be?

I have around 7 defaults registered in my name all roughly a year old and around 6 months of missed payments before the defaults my partner has a good but not perfect credit history with around 3k in debt. we both have around £21k p/a in earnings could we get a joint mortgage? or could my partner apply for the mortgage on her own?  

Thrugelmir

The sooner you can clear your debts the quicker you can move on with your life. Choice is entirely yours as to how you go about this. 

Kendowned

Thrugelmir thanks for your reply my partner's family willing to give her money towards a deposit so we don't have the option of using it to pay our debts. we are currently living with them and will soon have to consider renting or trying to get a mortgage as the current arrangement cannot go on for too much longer. if possible we would love to be able to put money towards owning a house rather than just paying rent.

runforlife

Go through a mortgage broker. There are lenders out there who will offer mortgages to applicants who are in a DMP. Speaking from experience 

K_S

@kemdowned How much do you need to borrow and how much deposit do you expect to have? I'll be honest, with 7 one-year old defaults, you would be far better off trying to borrow in the partner's sole name.

With the right lender, leaving you off the application for credit history reasons won't be an issue. Of course, that will mean that affordability will be limited to your partner's income.

Kendowned

@K_S we were looking at borrowing around £170k with around 15k for a deposit so we wouldn't be able to afford 10 or 15% I have been looking into the Help to Buy: Equity Loan as an option although there are not too many developments in our area for it.

K_S

Kendowned said:

@K_S we were looking at borrowing around £170k with around 15k for a deposit so we wouldn't be able to afford 10 or 15% I have been looking into the Help to Buy: Equity Loan as an option although there are not too many developments in our area for it.

@kendowned Your partner with 21k income is not going to be able to afford anywhere near 170k in borrowing, with out without H2B. If your income needs to be considered, with the number of defaults it's literally down to a single potential lender at sky-high rates and that too depending on the specifics of your defaults. Even they don't accept more than 4 recent defaults but do disregard certain kinds/amounts.

To be honest, it's a very long shot and I would recommend that you consider waiting and using that time to clean up your credit files, keep them squeaky clean, consider whether paying into SAYE is the right option when you have multiple unsatisfied defaults, etc. If you haven't already, do consider speaking to someone like Stepchange asking for advice on the best way to deal with your current debt situation.Good luck!

Kendowned

@K_S thanks for your help, my thinking around the SAYE scheme is that the defaults are already filed and will paying back the debts a year earlier in the DMP which have no interest being added to them help?

The SAYE scheme I signed up to at what I think was a good time the share price of my employer was low due to covid and we get a 20% discount I can pull out at any time and if the share price is lower at maturity we get back at least what we put in. Really after being in debt for so long I just see in 5 years' time I can be debt-free and have a relatively good amount of money to restart my finances.  

csgohan4

generally you can only borrow 4.5x of your total gross income, not including debt, that would be a good starting point

K_S

Kendowned said:

@K_S thanks for your help, my thinking around the SAYE scheme is that the defaults are already filed and will paying back the debts a year earlier in the DMP which have no interest being added to them help?

The SAYE scheme I signed up to at what I think was a good time the share price of my employer was low due to covid and we get a 20% discount I can pull out at any time and if the share price is lower at maturity we get back at least what we put in. Really after being in debt for so long I just see in 5 years' time I can be debt-free and have a relatively good amount of money to restart my finances. 

@kendowned I'm not an investment or debt adviser so can't really comment on what the best use of your spare funds may be. I'm sure in time you will be in a place to borrow what you need to buy a house. In the meantime just focus on keeping your debt low, keeping your credit history squeaky clean and saving up. Good luck!

Kendowned

Thanks for all your help, I spoke to an adverse mortgage broker today who was very helpful and echoed your comments. It sounds like I will be best placed 2 years after my last default to look into a mortgage which will be around June 2022. We may have to rent in the mean time or see if we can extend our current arrangement.