Bad credit mortgage options

markmm

Good morning fellow users.

I would appreciate it very much if anyone with knowledge in the mortgage world could offer some advice or opinion on my situation.

Update:   Please no moral crusaders answering about my defaults, I just want technical facts.

I currently have a mortgage with Nationwide (had it for 4.5 year) never missed a payment and am over paying it now as rate went down at last renewal and I didn't reduce the payment amount.

Nationwide values my house at £390k. The mortgage left to pay is £278k so current LTV is around 71%.

My partner and I earn around £150k a year.

Now the bad part.  I got into trouble around 3 years ago and defaulted on around 6 accounts (see my recent post on Credit file forum it has all the details) all unpaid around £56k.

I had decided it wasn't worth paying these as they will be Statute barred in a few year (Scotland) and heard paying them off doesn't get rid of the default or really influence lenders, default is a default. 

My partner has no bad credit events.  My score is good on Experian.

We would like to move house to something at a similar price or maybe slightly more (max £450k).

Some questions I have are

1. Is there a lender that would touch us for a joint mortgage?
2. Should we go to a bad credit broker?
3. Should we try and lower the LTV to below 70%?
4. What rate would we expect if there were a lender who would offer?
5. Would paying off the debt from the defaults make a big difference (could offer 50% to DCAs)? 
6. Or should we wait 3 years till the defaults roll off.

Thanks in advance

MXMike

Firstly not settling debts drags out the impact on your credit history and by not settling them you simply demonstrate to a lender/creditor that you can't be trusted to manage your debts so regardless of your score there will be a trail showing the debts are unpaid and I'd expect you are more likely to be declined outright by a mainstream lender.

Go to mortgage broker, one that is whole of market as they will have access to specialist lenders who are willing to consider more adverse than mainstream lenders but the broker should rule out mainstream lenders first once they have all your circumstances.

Lower LTV reduces the credit score requirement needed to pass but I'd deal with the debts first otherwise reducing LTV may be pointless.

If you need a specialist lender be prepared for a significant increase in the interest rate but you need to discuss this with the broker.

Please note that paying off the debts is the first step to improving your position but it takes time. Your score to a lender will increase over time and it is not an instant magic bullet by paying them off.

Don't wait for them to roll off. If you do not deal with your debt it will not roll off and will have a longer impact than you think. Ignoring debt simply makes your situation worse.

markmm

MXMike said:

Firstly not settling debts drags out the impact on your credit history and by not settling them you simply demonstrate to a lender/creditor that you can't be trusted to manage your debts so regardless of your score there will be a trail showing the debts are unpaid and I'd expect you are more likely to be declined outright by a mainstream lender.

Go to mortgage broker, one that is whole of market as they will have access to specialist lenders who are willing to consider more adverse than mainstream lenders but the broker should rule out mainstream lenders first once they have all your circumstances.

Lower LTV reduces the credit score requirement needed to pass but I'd deal with the debts first otherwise reducing LTV may be pointless.

If you need a specialist lender be prepared for a significant increase in the interest rate but you need to discuss this with the broker.

Please note that paying off the debts is the first step to improving your position but it takes time. Your score to a lender will increase over time and it is not an instant magic bullet by paying them off.

Don't wait for them to roll off. If you do not deal with your debt it will not roll off and will have a longer impact than you think. Ignoring debt simply makes your situation worse.

Debts on Scotland are statute barred after 5 years (i.e. they debt is unenforceable) then removed from your file after 6.  I could pay them of but that would reset the clock on SB.  

"If you do not deal with your debt it will not roll off and will have a longer impact than you think." 

Utter bull, you clearly are uniformed on how defaults work. They are removed after 6 year whether you pay the debt off or now.  That you don't know this makes the rest of your post irrelevant.

ACG

1. Is there a lender that would touch us for a joint mortgage? - Probably. 
2. Should we go to a bad credit broker? - I think you will need to. 
3. Should we try and lower the LTV to below 70%? - Speak to the broker, but it probably wont be necessary. 
4. What rate would we expect if there were a lender who would offer? - 5-6%
5. Would paying off the debt from the defaults make a big difference (could offer 50% to DCAs)? Probably not. 
6. Or should we wait 3 years till the defaults roll off. - Why not see what your options are now and then decide if you want to move forward or wait? No harm in checking out your options. 

markmm

ACG said:

1. Is there a lender that would touch us for a joint mortgage? - Probably. 
2. Should we go to a bad credit broker? - I think you will need to. 
3. Should we try and lower the LTV to below 70%? - Speak to the broker, but it probably wont be necessary. 
4. What rate would we expect if there were a lender who would offer? - 5-6%
5. Would paying off the debt from the defaults make a big difference (could offer 50% to DCAs)? Probably not. 
6. Or should we wait 3 years till the defaults roll off. - Why not see what your options are now and then decide if you want to move forward or wait? No harm in checking out your options. 

Thanks ACG.  I'll look into contacting a adverse mortgage broker then.  Any suggestions?