Mortgage and previous bad credit/current loan

tetty177

Just looking for advice/others experience. So myself and my partner are first time buyers and looking to start the buying process at the end of this year. We have both had previous bad credit however currently have good credit ratings according to the 3 agencies. I do have a default from 2019 still showing but the debt has been deemed unenforceable so I am questioning this default however the debt is for £600 so I am able to pay this off if necessary. My husband has no defaults / missed payments showing. 

My worry is of course our bad credit history (this was from around 2012-2017. However my other concern is we both have a individual loan of 10K. So pay £280 per month each in loan payments. We recently got this loan as our car died and we need it for work and collecting our 2 children from parents who are our childcare. I also have a student loan of around £140 per month. 

My husband earns £36000 per year but has regular overtime which brings in another £32000 per year. He has been in his role since 2010 but overtime has been regular for about 18 months. I work 2 part time jobs one I have been in since 2009 and earn just over £27000 the other I have only started recently and earn £23000 from. We bring home around £6800 per month after tax my husband’s pension payment and my student loan. We are looking to borrow around £375000 and have a £50000 deposit so mortgage repayment with current interest rates will be around £2170. My worry is that the loans will stop us getting a mortgage. They are always paid on time so no issues there. We both have a credit card but we use them to pay for petrol/food which we then pay in full each month mainly to help show we can use credit sensibly more than anything else. Any advice on the impact this will have on a mortgage application. Based on the loan payments and income the online calculators so say we could be offered up to £470000 so we are asking for 95k less. When banks do affordability checks do they take into account utility bills, mobile contracts, things such as swimming lessons I pay for the children? And what is a good income to debt ratio? Is this gross or net income? 

For those that asked the reason we got a loan and didn’t use the deposit is that the deposit is a gift from my parents so we don’t actually have the money. 

Thanks to all who have got to the end of this and any advice would be grateful. I did post this previously on another board so sorry for the duplicate as I was advised to move it.

K_S

@tetty177 Quick comments -

Bad credit history from 2012-17: Once it's off your report, with the vast majority of lenders it'll have no further relevance to a new mortgage application.

Default from 2019 - if it's just the one unsatisfied default for £600, it *may* cause a mainstream lender credit-score fail at 90% LTV depending on the details, but on its own it shouldn't stop you from accessing mainstream/mainstream-ish rates. In any case this should show up at the DIP/AIP stage. 

Commitments - personal loan, student loan, dependents, etc may all have some impact on your affordability (as per lender calcs). How much of an impact will depend on the specific lender and the numbers. You could play around with a few lender affordability calculators to get a very rough idea. With credit cards, do note that even if you pay it off in full every month, many lenders will assume the number showing on the credit report as a financial commitment. In most cases it doesn't make a difference but it could if you are looking to maximise borrowing.

https://www.halifax-intermediaries.co.uk/tools-calculators/mortgage-affordability-calculator.html

https://online.accordmortgages.com/public/mortgages/quick_enquiry.do

Income - if husband's OT has been received consistently for 18+ months, there should be lenders that will consider it depending on how it shows on the payslips, what the P60 shows, etc. Your second recent job might not be taken into account with most lenders, as with second jobs most lenders want to see a history so they can be assured that you haven't taken it on just to boost borrowing.

Outgoings - in most cases, outgoings like utility bills, mobile bills, etc. are built into the lender affordability calculators. Unless it's a formal finance/installments which shows on your credit report, swimming lessons will be taken as discretionary expenditure (things that can be stopped if needed) so shouldn't impact borrowing.

Good luck, I hope it all works out!

tetty177 said:

Just looking for advice/others experience. So myself and my partner are first time buyers and looking to start the buying process at the end of this year. We have both had previous bad credit however currently have good credit ratings according to the 3 agencies. I do have a default from 2019 still showing but the debt has been deemed unenforceable so I am questioning this default however the debt is for £600 so I am able to pay this off if necessary. My husband has no defaults / missed payments showing. 

My worry is of course our bad credit history (this was from around 2012-2017. However my other concern is we both have a individual loan of 10K. So pay £280 per month each in loan payments. We recently got this loan as our car died and we need it for work and collecting our 2 children from parents who are our childcare. I also have a student loan of around £140 per month. 

My husband earns £36000 per year but has regular overtime which brings in another £32000 per year. He has been in his role since 2010 but overtime has been regular for about 18 months. I work 2 part time jobs one I have been in since 2009 and earn just over £27000 the other I have only started recently and earn £23000 from. We bring home around £6800 per month after tax my husband’s pension payment and my student loan. We are looking to borrow around £375000 and have a £50000 deposit so mortgage repayment with current interest rates will be around £2170. My worry is that the loans will stop us getting a mortgage. They are always paid on time so no issues there. We both have a credit card but we use them to pay for petrol/food which we then pay in full each month mainly to help show we can use credit sensibly more than anything else. Any advice on the impact this will have on a mortgage application. Based on the loan payments and income the online calculators so say we could be offered up to £470000 so we are asking for 95k less. When banks do affordability checks do they take into account utility bills, mobile contracts, things such as swimming lessons I pay for the children? And what is a good income to debt ratio? Is this gross or net income? 

For those that asked the reason we got a loan and didn’t use the deposit is that the deposit is a gift from my parents so we don’t actually have the money. 

Thanks to all who have got to the end of this and any advice would be grateful. I did post this previously on another board so sorry for the duplicate as I was advised to move it.

Bluebell1000

Looking at your income, could you try and save up over 3 months living on a tighter budget, and clear the loan? I'm not a mortgage advisor but I'd have thought you would find it easier for affordability if that's gone.

tetty177

Thanks both. Yes we are going to try and see if we can clear the loan or at least some of it if we can. Suppose I am looking at a worst case scenario. 

Re the job it’s actually something I have been doing for my brother for the past 2 years as a favour while he built his business and he is now in a position to pay me a wage to continue doing it - bookkeeping type stuff. I can get a letter to this effect but not sure if that will look worse as it’s working for a family member. 

ACG

The balance of the loan is not really a major issue, it is the contractual repayments which will affect the affordability of the mortgage.

If it passes with the loans, then if you have £9k or £10k balances, it wont make much odds. 

K_S did a good job of answering everything though, I would echo everything they say.