Mortgage and debt repayments

Jimmerp85

Hi all,
my Wife (35)  and I (39) are potentially and unexpectedly potentially being gifted a house deposit. Here’s where the problems start!! My wife and I have had debt that we are paying off.. 2 loans one for £484 and £320. 

(Long story short I retrained in my career  3 years ago and took a substantial dip in salary and have only just now started earning what I was before in my new role and in the position to try and get on top of it  )

we now  earn  £82k a year before her over time which isn’t guaranteed but normally about £3k a year. 

Both have good credit scores with no issues in the last 6 years. 

Houses around us are about £300k which we would put 10% down.

are we dreaming we could get the mortgage with the debt or likely have to wait to get it all paid off ? 

She has about 2 years left on her loan and I have 3.5 years. 

Are we wasting our time even trying? I’ve had a look and our  DTI % including the mortgage would be about 33% .

would just like to either stop worrying and go for it or buckle up and try and get everything paid off.

any help would be appreciated 

Mark_d

Paying off your loans first will give you more disposable income - thus allowing you to borrow more and get lower interest rate on your mortgage.

Jimmerp85

Mark_d said:

Paying off your loans first will give you more disposable income - thus allowing you to borrow more and get lower interest rate on your mortgage.

Ok , it’s just so confusing - we obtained a mortgage in principle and was honest with the bank regarding payments etc - but I am led to believe these aren’t worth the paper they are written on

MattMattMattUK

Jimmerp85 said:

Mark_d said:

Paying off your loans first will give you more disposable income - thus allowing you to borrow more and get lower interest rate on your mortgage.

Ok , it’s just so confusing - we obtained a mortgage in principle and was honest with the bank regarding payments etc - but I am led to believe these aren’t worth the paper they are written on

They are generally accurate, but you really should speak to an independent broker, not a bank, the broker will go to the whole market, almost certainly get you a better rate and can advise you on various options. 

born_again

Jimmerp85 said:

Mark_d said:

Paying off your loans first will give you more disposable income - thus allowing you to borrow more and get lower interest rate on your mortgage.

Ok , it’s just so confusing - we obtained a mortgage in principle and was honest with the bank regarding payments etc - but I am led to believe these aren’t worth the paper they are written on

They can change once the lender goes through the full process & a hard credit check. Whether it will or not depends a lot on the lenders risk appetite, which change like the weather.

Strummer22

Just to confirm... £484 and £320 are the monthly repayments, not the loan balance? 

Anyway, you need to borrow £270,000 on £82,000 income, so 3.3 times income. Obviously that's not the only thing banks look at, but is not unreasonably high. 

The AIP is subject to checks by underwriters. You're correct that they can be refused for any number of reasons, some of which are very opaque to applicants.

I recommend finding a good mortgage broker rather than just going to one bank, unless you already did your research and decided that particular bank would give you the best rate and terms. A broker will help you find the right lender for your circumstances.

Jimmerp85

Strummer22 said:

Just to confirm... £484 and £320 are the monthly repayments, not the loan balance? 

Anyway, you need to borrow £270,000 on £82,000 income, so 3.3 times income. Obviously that's not the only thing banks look at, but is not unreasonably high. 

The AIP is subject to checks by underwriters. You're correct that they can be refused for any number of reasons, some of which are very opaque to applicants.

I recommend finding a good mortgage broker rather than just going to one bank, unless you already did your research and decided that particular bank would give you the best rate and terms. A broker will help you find the right lender for your circumstances.

Thanks! Yeah that is the monthly payments not the balance.  The AIP was just through my bank as an experiment . I would like defo go to a broker - I just don’t want to get my hopes up if it’s a no go ! 

ACG

Speak to a broker. 
I am 99% sure you will be fine. 

VERY basic sums...
£82k pa income 
£8k pa debt repayments
-------
£74k income. x 4.5 = £295k-ish

With your £30k on top that gets you a little above £300k. 

The buffer is not huge, but just do some quick calculations I think you will be fine. 

Obviously if you have 5 kids you forgot to mention or an ex mistress wanting maintenance or student loans etc then it might be getting a bit tight. 

Jimmerp85

ACG said:

Speak to a broker. 
I am 99% sure you will be fine. 

VERY basic sums...
£82k pa income 
£8k pa debt repayments
-------
£74k income. x 4.5 = £295k-ish

With your £30k on top that gets you a little above £300k. 

The buffer is not huge, but just do some quick calculations I think you will be fine. 

Obviously if you have 5 kids you forgot to mention or an ex mistress wanting maintenance or student loans etc then it might be getting a bit tight. 

Thanks this really has helped! Fortunately for me no mistress!! 

ACG

Jimmerp85 said:

ACG said:

Speak to a broker. 
I am 99% sure you will be fine. 

VERY basic sums...
£82k pa income 
£8k pa debt repayments
-------
£74k income. x 4.5 = £295k-ish

With your £30k on top that gets you a little above £300k. 

The buffer is not huge, but just do some quick calculations I think you will be fine. 

Obviously if you have 5 kids you forgot to mention or an ex mistress wanting maintenance or student loans etc then it might be getting a bit tight. 

Thanks this really has helped! Fortunately for me no mistress!! 

Of that whole list, I think I would rather the mistress haha. 
5 kids sounds like a nightmare! 

eschaton

Not being rude but is a mortgage going to be less than what you currently pay for your home?

Why did you need two loans with such a high income?

Personally I’d look to pay off the loans ASAP and take it from there. You want to try and get the lowest possible mortgage rate as higher rates will be costly for £270k.