Buying as soon as possible Vs. Waiting for credit rating to improve

Becktacular

My husband and I are now in a position where we should be able to buy a house thanks to being gifted a large sum of money from each of our parents for a deposit. Hubby's credit rating is OK but I was until very recently on a debt management plan and so have lots of missed payments and 3 defaults on my file.
I posted here before about whether we would even get given a mortgage with my credit rating being what it is and I think after doing a bit of reading that we would get a mortgage with someone, just likely at a worse interest rate.

So my question is, would it be better to wait for a few years for the credit rating to improve a bit until trying to get a mortgage, or is it best to just go for it ASAP to get on the ladder, pay the higher interest rate for a while until we can remortgage when my credit rating is better (and hopefully the value of the house has increased a bit too)?

K_S

@becktacular I think you've touched upon the trade-offs in your post.

Which course of action will end up saving/costing you more money depends on a lot of impossible-to-predict variables, especially whether or not house prices will rise in the coming years, and if so by how much. The direction that interest rates take will also impact the numbers.

In most cases, time is indeed the best healer for a poor credit history. But if house prices go up even moderately in the next few years, any savings you make from a marginally better interest rate will be more than wiped out.

Becktacular

K_S said:

@becktacular I think you've touched upon the trade-offs in your post.

Which course of action will end up saving/costing you more money depends on a lot of impossible-to-predict variables, especially whether or not house prices will rise in the coming years, and if so by how much. The direction that interest rates take will also impact the numbers.

In most cases, time is indeed the best healer for a poor credit history. But if house prices go up even moderately in the next few years, any savings you make from a marginally better interest rate will be more than wiped out.

Thank you. What I suspected then, really good to just confirm it a bit with someone so cheers! Hopefully the probable higher rate won't affect the amount they will lend us too much.

MovingForwards

I'm with a sub-prime lender and don't give the interest rate a thought, I've got my home.

The lender would have lent me pretty much the same as a high street lender and I opted for a 5 year fix. I really didn't fancy the stress of remortgaging after 2 years and know how much I'm paying out for another couple of years. 

Speak with an independent broker and find out what your options are.

RelievedSheff

We used an adverse credit lender to secure the home we really wanted. We took out a short term 2 year fixed rate. At the end of the term our credit had improved enough to secure a high Street mortgage. We are now on a longer term 5 year fix at much better rates.

Had we waited the extra couple of years house prices have increased so much here that we now couldn't afford to buy this house. We would have missed the boat.

redundantmortgage

If you can afford to buy now then do it. When I was a first time buyer the biggest mistake I made was wait. My reason was to save a bigger deposit to get a better interest rate.

I did get a better interest rate but in the time I saved the property prices went from £180k to £260k and I paid £55k in rent so that's £135k extra. 

getmore4less

The base measure is the interest on the mortgage against the rent.

Owning does come with other costs so they need to be factored.

if renting the money is cheaper than renting a property then that is a good time to consider buying.

Any capital payment is saving/equity building.

As long as you keep on top of the finances.

credit history will improve
LTV will improve(especially if you can overpay)

better rates will come in time.

How big a deposit
LTV for target property
How much can you afford a month.

You can crunch some numbers.