Is my mortgage advisor right?

AbsensCarens

Hello everyone,

I thought that getting a 90% LTV mortgage shouldn’t be a big problem for me with my situation. Unfortunately, according to my mortgage advisor the process is a bit complicated.

Before making an offer I sorted my DIP. I am applying with my partner and if a DIP is something you can rely on, we’re good to borrow £145k. More than we need. We are first time buyers. My Experian credit score is excellent. In the last six years never missed one payment, never been bankrupt, no defaults or anything like that. However, there is one little scratch on my credit history. It doesn’t appear on my credit report but shows up on my bank account statement. It’s a debt payment I’m paying to a debt collector. Payments are on time. I pay monthly whatever I agreed to pay. I got still £1765 to repay.

Because of that payment showing up on my accounts my mortgage advisor suggested that banks will be questioning this payment( I agree with that) and eventually could refuse to lend me money. 

Also told me that she contacted some lenders and they already refused. I don’t understand how is that possible. I can’t really imagine how do mortgage advisor work? Do they just email potential lenders, describe their customers situation and get a response “no, we don’t like this one, we won’t lend him any money”?

Eventually, she found one lender and asked him what would happen if I paid my debt in full. Would this change my situation in any way and helped me do get a mortgage with 10% deposit. She’s waiting for their response. If that fails she wants to try using sub prime lenders who will require at least 15% deposit. 

So my questions are:

Is she playing it right?

Would paying off my debt immediately help me to get a better mortgage, having in my mind, that debt payments show on my bank statements and I am in the middle of the process?

Do you think this debt is such a big problem and we have no chances to get a mortgage?

I appreciate any response to my questions. 

ACG

Some lenders will decline you if they can see you have a payment plan in place for a bad debt.
I dont think it is a big enough of an issue to prevent you getting a mortgage though. 

Paying off the debt tomorrow wont really help unless you are not looking to buy for 3 months as it will still show on bank statement. 

MovingForwards

Of course your broker is doing the right thing checking, the alternative is the application goes in, you pay fees etc and then potentially get rejected. Move on to the next, repeat the process and it's cost even more money and still potentially no mortgage.

You have a longstanding arrangement to clear a debt off, yes it's a problem to mainstream lenders as they don't like it, they like it even less due to the pandemic and have tightened up criteria.

Paying it off would help, but then you'd have to wait 1 - 6 months so it doesn't show on your statements; each lender requires a different amount.

You've been told you should be able to get a mortgage, but it's with a sub-prime lender and higher interest rates.

EmzJenks

I have one debt payment of £10 a month going out my account, I'm having to use a sub prime (Kensington) but got a DIP for 90% ltv full applications went in last week 

ACG

EmzJenks said:

I have one debt payment of £10 a month going out my account, I'm having to use a sub prime (Kensington) but got a DIP for 90% ltv full applications went in last week 

Is there no adverse showing on your credit report? 

AbsensCarens

EmzJenks said:

I have one debt payment of £10 a month going out my account, I'm having to use a sub prime (Kensington) but got a DIP for 90% ltv full applications went in last week 

Congratulations. May I ask what’s the annual interest on your mortgage?

EmzJenks

ACG said:

EmzJenks said:

I have one debt payment of £10 a month going out my account, I'm having to use a sub prime (Kensington) but got a DIP for 90% ltv full applications went in last week 

Is there no adverse showing on your credit report? 

My credit report is "fair" at the moment, nothing showing as current debt wise. All historic. Last default over 4 years ago. CCJ over 3 years ago satisfied in 2 months of being issued. Also lucky my salary is really good now and my husband's credit is perfect 

EmzJenks

AbsensCarens said:

EmzJenks said:

I have one debt payment of £10 a month going out my account, I'm having to use a sub prime (Kensington) but got a DIP for 90% ltv full applications went in last week 

Congratulations. May I ask what’s the annual interest on your mortgage?

Thank you, still got to get the mortgage offer yet which is incredibly stressful haha
Answered all their questions though, or ones I thought may come up straight away. Always best to be upfront about these things.
Rate isn't great as it's sub prime but only fixing for 2 years 5.19% 

AbsensCarens

EmzJenks said:

Thank you, still got to get the mortgage offer yet which is incredibly stressful haha
Answered all their questions though, or ones I thought may come up straight away. Always best to be upfront about these things.
Rate isn't great as it's sub prime but only fixing for 2 years 5.19% 

I can only imagine how stressful it’s going to be . Good luck!

Thrugelmir

From the mortgage lenders perspective. You've still got old an debt that you defaulted on. You are now stringing out repayment and treating the debt as an interest free loan. This course of action profiles you into a category of borrower , i.e. your attitude and responsibility towards paying your debts. There'd prefer not to deal with you in case you default. 

Settle the debt and start afresh. Attempting to be clever sometimes backfires. 

ACG

EmzJenks said:

ACG said:

EmzJenks said:

I have one debt payment of £10 a month going out my account, I'm having to use a sub prime (Kensington) but got a DIP for 90% ltv full applications went in last week 

Is there no adverse showing on your credit report? 

My credit report is "fair" at the moment, nothing showing as current debt wise. All historic. Last default over 4 years ago. CCJ over 3 years ago satisfied in 2 months of being issued. Also lucky my salary is really good now and my husband's credit is perfect 

Forget the credit score. If there is no adverse showing, I cant help but think Kensington was a bit of a hammer to crack a nut approach but I am basing that on limited info. Hopefully your broker didnt just go to the obvious lender without trying one or 2 more flexible lenders first.