Applying for a mortgage with debt - where do we stand?

livewire82

Hi all

Myself and my partner currently live in a property with an approximate value of £405,000. We are 2.5 years into a 5 year fixed term and have £206,000 left on our mortgage. We're looking to move, however between us we have around £55,000 worth of debt (made up of loans, credit cards and overdrafts).

We have £199,000 of equity in the house but with the debt, this is brought down to £144,000. My question is, when applying for a mortgage on a new property do they deduct debts from equity and then base the application on the remaining figure or do they factor in the debt and financial history (i.e. multiple credit cards that are not paid off each month suggesting a reliance on them). I've not missed any payments and the last time I checked, I had a credit score of 601.

Ultimately, I'm just trying to establish if we're going to have any issues when looking to move.

Also, what it the typical rule of thumb for the main lenders when calculating what you can borrow based on salaries? I'm seeing anywhere between 4 - 5.5 times. For us that's a swing of £117,000 which is an awful lot when understanding what value properties we should be looking at.

Hoenir

Suggest you speak to a mortgage broker as the other debt you owe will have a bearing on any mortgage application made. Lenders have regulatory responsibilities for both responsible lending and a duty of care towards their customers. In effect you are consolidating the debt into a new mortgage. Provides the solution however doesn't address the root cause. 

fatbelly

It sounds like you are carrying a lot of high-interest debt.

That will obviously have an effect

To address the problem you my want to post on debt-free wannabe

RelievedSheff

Try plugging your numbers into one of the lenders websites which will give you a very rough idea of what they MIGHT lend you.