Mortgage apply - can my bipolar, payday loans affect this

foldydog1234

Hi everyone,

My partner and I are hoping to apply for a mortgage later this year around June or a July. 

I have bipolar disorder which has led to irresponsible behaviour in the past.

I took a string of payday loans, due to manic phases leading to horrible spending and debt accruing. I feel very ashamed and awful about this but was truly out of control. They were all settled on time but aware this still doesn’t change they are a negative to mortgage lenders. 

Through doing an overwhelming amount of overtime, I closed out my final payday loan in June 2020 (no late payments on any of these), I closed out a credit union loan in December 2020 (no late payments during)and a 118 unsecured loan in June 2021 (no late payments on these)

I had a two month arrears in Klarna from July 2020 but the account was paid up in full in September 2021 and those arrears were paid in July 2020.

My question is that given the time elapsed, how likely are these to affect my mortgage - appreciate this is very vague, but even some rough input would be helpful.

Since then I have not missed a single payment and have used credit responsibly. I keep my utilisation low. I did stupidly miss a direct debit payment last month for £24.99 but this was paid back up within 2 weeks. No other returned direct debits at all otherwise.

I also wondered if lenders consider bipolar disorder as a factor in decisions when looking at issues such as above and whether this would lead to them making dispensations? I have evidence from healthcare providers to demonstrate my diagnosis. I am now in successful treatment which directly correlates with my improvements with handling of my finances.

Appreciate this is a “how long is a piece of string” question. I will also be using a broker given the complicated circumstances and will contact step change and citizens advice too, but in the meantime I would appreciate any input. 

I would love to be able to purchase a house and not being able to will be a huge blow to myself and my wife. I’m terrified that my illness is going to ruin everything, despite the fact I’m able to show what is apparently very good financial practices since. We are looking at a 95% LTV which we pass affordability for and the price range we are looking at is miles less than we have been calculated by a broker as being able to borrow on our income (100k less, we are aware of not wanting to overstretch ourselves even though on paper we could borrow more), but aware this makes approval even harder.

Thanks in advance

user1977

I can't see lenders being required (or likely) to make dispensations for something which sounds likely to cause them a problem - so I would expect you'd just be considered on the same basis as anybody else with a similar borrowing/default history. Which might mean you'd be better waiting a while to demonstrate a clearer credit record.

foldydog1234

user1977 said:

I can't see lenders being required (or likely) to make dispensations for something which sounds likely to cause them a problem - so I would expect you'd just be considered on the same basis as anybody else with a similar borrowing/default history. Which might mean you'd be better waiting a while to demonstrate a clearer credit record.

Hey, thanks for your response. Yes, understood, I’m not proposing they would give me special treatment - I meant more that it they raised this as a concern, would a letter from healthcare professional provide some context during their consideration? I’m not sure if that is a thing or not, hence the question. I was hoping that given it’s been 3 years, it might not have such a significant impact.

I still feel incredibly stupid and it’s doubly frustrating to see that once starting treatment and support, I was very quickly able to maintain much better control over my finances and not go on manic borrowing sprees. I appreciate that banks aren’t interested in an sob story, it’s more just that I’m so disappointed in how it has made me behave in the past with money.

kingstreet

I would think 95% would be difficult until your late/missed payments and PDL activity are at least two, possibly three years old. You have a  broker, what do they say? Have they attempted an agreement in principle with a lender using a soft credit search?

foldydog1234

Ok, the payday loans and missed klarna will be 3 years old in July this year (we would be applying after this). The two other loans (standard loans not payday) are paid and had no late payments on them.

The only issue then is this missed direct debit. It is not something that would show up on a credit report and was paid off. By the time I apply it will be more than three months old - if they were to ask for more than three months statements is this likely to have much impact?

I did a soft search AIP via Halifax which did not throw up any concerns and advised we could potentially borrow up to 100k more than we are actually looking to. Have no intentions to do that though. 

Noneforit999

You might be best to find a mortgage broker instead of picking lenders at random yourself.

Have you checked your credit report? Do the things you mentioned show as missed payments or defaults?

A default is going to be much worse to a lender than a couple of missed payments but it really depends on how much of a risk the lender needs to take.

If you only have a 10% deposit and you have recent missed payments on your report, you may find it difficult (probably not impossible) to find a lender and if you do, it might be a higher interest rate than mainstream lenders.

Get a broker, show them your credit report and ask them to suggest some lenders. 

MobileSaver

Noneforit999 said:

If you only have a 10% deposit and you have recent missed payments on your report, you may find it difficult (probably not impossible) to find a lender and if you do, it might be a higher interest rate than mainstream lenders.

The OP only has a 5% deposit...

@foldydog1234 it sounds like you may struggle especially as you missed a payment only last month. Do you have a 5% deposit right now or is that all you will have saved by July when you consider applying? Can you increase the deposit to 10% in a realistic time frame?

foldydog1234

Have checked credit report. The klarna shows as an arrears, fom 2020. No defaults or ccjs or anything like that.

The missed direct debit was so stupid, it was for a gym membership not anything credit related, don't know if that makes a difference.

Haven't had anything like that in a long long time which is so stupid and it was down to an error, but it can't be changed. If they ask for 3 months statements then it should be ok by the time we apply but likely they will want to look further back on bank statements given the credit report.

Ksw3

It sounds as though you have really turned things around which I'm sure took a great deal of effort. You should be really proud.

I cant comment in how likely it is that you will get a mortgage now, but if you keep up the good work I'm sure it will be a case of when and not if. 

foldydog1234

Ksw3 said:

It sounds as though you have really turned things around which I'm sure took a great deal of effort. You should be really proud.

I cant comment in how likely it is that you will get a mortgage now, but if you keep up the good work I'm sure it will be a case of when and not if. 

Thanks, I appreciate that. It was graft lol, during lockdown there was a lot of overtime available becaused we had people on furlough - I took it on so I could knock my debts on the head but boy it absolutely ran me down lol. 3 weeks a month doing callout throughout the night and working in the day. Worth it to pay off but that's also partly what's frustrating me so much with this recent !!!!!! up of mine, worried it's going to scupper my hard work. Guess we'll find out. 

deano2099

Rather than borrowing less it may be worth considering what mortgage your wife could get on her own should it prove to be an issue.