Adverse credit Mortgage application

sandraethomson

I had previously posted this in a debt thread and was advised to post here also so apologies for the duplication.

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 8.5k of debts being repaid over 4 years and a 25% deposit or having no debts and a 15% deposit. 

ACG

Its a difficult question to answer as things change. 

But what you could do is keep things as they are and keep saving. Then in 8 months, you can look a little more closely at which route to take. 

It might be a case of rates of x% with the debt or y% without  and then you cna decide which is best for you. 

Most lenders will use the DMP repayment amount rather than the original contractual amount - but not all so you need to be careful there as it could be a problem at underwriting stage if you are keeping the debts. 

Also although the defaults may have dropped off your credit report, many lenders keep internal records going back further. A good example is RBS/Natwest, if they have ever had to write off a penny, you will have a flag next to your name and they will not lend to you.

sandraethomson

ACG said:

Its a difficult question to answer as things change. 

But what you could do is keep things as they are and keep saving. Then in 8 months, you can look a little more closely at which route to take. 

It might be a case of rates of x% with the debt or y% without  and then you cna decide which is best for you. 

Most lenders will use the DMP repayment amount rather than the original contractual amount - but not all so you need to be careful there as it could be a problem at underwriting stage if you are keeping the debts. 

Also although the defaults may have dropped off your credit report, many lenders keep internal records going back further. A good example is RBS/Natwest, if they have ever had to write off a penny, you will have a flag next to your name and they will not lend to you.

Thank you 

So my loans are from RBS and I am aware they can still see I defaulted. They haven't written off any debt but did freeze interest.  Will this mean that I will never be able to get a mortgage from them or any sister companies ? 

ACG

They have written off income. 
I think its probably best you avoid RBS/Natwest for the mortgage.