Adverse credit mortgage application

sandraethomson

I entered a DMP in June 2020 with £25000 debt. Never missed a scheduled payment. Although it will fall off of my credit file next year, payments are predicted to last another 5 years. 

Between us, my partner (no adverse credit) have been saving for a deposit for a mortgage. We have saved roughly 20% but won't be applying for any mortgage untill the defaults have cleared from my credit file. 

Even although they clear the monthly payments will still show on my statement and be considered a financial commitment. 

If we were to pay the debt off we would cut our deposit in half, but we would then be debt free, and we could continue to save for the next 6 to 8 months and potentially get back to a 15% deposit. 

My question is what would put us in a better position when applying. Having 8k of debts being repaid over 4 years and a 25% deposit or having no debts and a 15% deposit. 

Brie

Personally I think that banks would like to see a problem solved rather than one that is being solved, if you know what I mean.  Maybe you could have an informal chat with a potential mortgage provider to get some understanding about what they might want to see?  Or a mortgage adviser.  I think you might need one to get your case through a banks acceptance process.

sandraethomson

Brie said:

Personally I think that banks would like to see a problem solved rather than one that is being solved, if you know what I mean.  Maybe you could have an informal chat with a potential mortgage provider to get some understanding about what they might want to see?  Or a mortgage adviser.  I think you might need one to get your case through a banks acceptance process.

Thank you, I do plan on going through a Mortgage advisor Im just wary of approaching one too early and incurring additional charges. It might be best to speak to someone earlier though. 

Rob5342

Have you made CCA requests? If the current owner can't produce the CCA then you can simply stop paying the debt.

How much were you considering paying to clear the debts? You should be able to negotiate a full and final settlement that is much less than the outstanding amount.

I'd say clear the existing debt as cheaply as you can by making CCA requests and making settlement offers, and then get your savings built up for when the defaults have dropped off. 

RAS

Edited:

Re-reading your OP, you do realise that the DMP does fall off your credit record next year, as it doesn't have a legal status like an IVA?

The reporting of defaults on your credit records will cease after the 6th anniversary. So you need to check your credit records to find out when they are and if you think any are wrong, try to get them adjusted. 

You would benefit by posting this over on the Mortgages sub forum where there are several mortgage advisors who are very generous with their knowledge. Keep this thread to discuss ways of reducing the debt payments.

Since the debts will fall off your credit record next year, it doesn't matter if you settle fully or partially. Have you ever received reduced offers from our creditors?

sandraethomson

Rob5342 said:

Have you made CCA requests? If the current owner can't produce the CCA then you can simply stop paying the debt.

How much were you considering paying to clear the debts? You should be able to negotiate a full and final settlement that is much less than the outstanding amount.

I'd say clear the existing debt as cheaply as you can by making CCA requests and making settlement offers, and then get your savings built up for when the defaults have dropped off. 

Hi, I'm not ber knowledgeable on debt repaymentsetc. I was drowning in repayments and just handed everything over to stepchange. 

I have no idea if the any of debt has been passed to a 3rd party or not.  I was worried  partial settlement wouldn't be agreed to as I have enough saved to cover it all. 

sandraethomson

RAS said:

Edited:

Re-reading your OP, you do realise that the DMP does fall off your credit record next year, as it doesn't have a legal status like an IVA?

The reporting of defaults on your credit records will cease after the 6th anniversary. So you need to check your credit records to find out when they are and if you think any are wrong, try to get them adjusted. 

You would benefit by posting this over on the Mortgages sub forum where there are several mortgage advisors who are very generous with their knowledge. Keep this thread to discuss ways of reducing the debt payments.

Since the debts will fall off your credit record next year, it doesn't matter if you settle fully or partially. Have you ever received reduced offers from our creditors?

Hi 

Yes i understand the defaults will all fall off between June and September next year. Some are September because they recorded missed payments for a number of months before recording a default.

I will have a look for that Mortgages forum and also post this there thank you 😊 

I have never had any settlement offers from any creditors.

ManyWays

Rob5342 said:

Have you made CCA requests? If the current owner can't produce the CCA then you can simply stop paying the debt.

How much were you considering paying to clear the debts? You should be able to negotiate a full and final settlement that is much less than the outstanding amount.

I'd say clear the existing debt as cheaply as you can by making CCA requests and making settlement offers, and then get your savings built up for when the defaults have dropped off. 

I totally agree with this approach. You need to settle all of these debts and some of this should be possible at a reduced rate.

By looking at your bank statements, mortgage lenders know about defaulted debts that no longer show on your credit record if you are still paying them, or have done in the last six months. So once the 6 months point is passed, a lender wont know if you settled the debt partially or stopped paying as it was unenforceable with no CCA.

So instead of Having 8k of debts being repaid over 4 years and a 25% deposit or having no debts and a 15% deposit. there may well be a third and much better choice, of having no debts and a 20% deposit!

sandraethomson

ManyWays said:

Rob5342 said:

Have you made CCA requests? If the current owner can't produce the CCA then you can simply stop paying the debt.

How much were you considering paying to clear the debts? You should be able to negotiate a full and final settlement that is much less than the outstanding amount.

I'd say clear the existing debt as cheaply as you can by making CCA requests and making settlement offers, and then get your savings built up for when the defaults have dropped off. 

I totally agree with this approach. You need to settle all of these debts and some of this should be possible at a reduced rate.

By looking at your bank statements, mortgage lenders know about defaulted debts that no longer show on your credit record if you are still paying them, or have done in the last six months. So once the 6 months point is passed, a lender wont know if you settled the debt partially or stopped paying as it was unenforceable with no CCA.

So instead of Having 8k of debts being repaid over 4 years and a 25% deposit or having no debts and a 15% deposit. there may well be a third and much better choice, of having no debts and a 20% deposit!

Thank you,

Have you any idea of where the best place is to get advice in offering a settlement fugure through Stepchange. 

Rob5342

sandraethomson said:

ManyWays said:

Rob5342 said:

Have you made CCA requests? If the current owner can't produce the CCA then you can simply stop paying the debt.

How much were you considering paying to clear the debts? You should be able to negotiate a full and final settlement that is much less than the outstanding amount.

I'd say clear the existing debt as cheaply as you can by making CCA requests and making settlement offers, and then get your savings built up for when the defaults have dropped off. 

I totally agree with this approach. You need to settle all of these debts and some of this should be possible at a reduced rate.

By looking at your bank statements, mortgage lenders know about defaulted debts that no longer show on your credit record if you are still paying them, or have done in the last six months. So once the 6 months point is passed, a lender wont know if you settled the debt partially or stopped paying as it was unenforceable with no CCA.

So instead of Having 8k of debts being repaid over 4 years and a 25% deposit or having no debts and a 15% deposit. there may well be a third and much better choice, of having no debts and a 20% deposit!

Thank you,

Have you any idea of where the best place is to get advice in offering a settlement fugure through Stepchange. 

Make CCA requests first, don't even think about settlement offers until you know the debt is enforceable. 

If they are enforceable then its best to approach the creditors yourself and make an offer, if they reject it then wait six months and try again. Never get Stepchange involved when it comes to making settlement offers as they'll just want to pay the whole sum you have available split proportionally across your creditors instead of trying to settle things at a reduced rate.