Help! F.T.B with existing debt.

sparky3153

Hello everyone.

I am a first time buyer looking for a joint mortgage with my partner.
We both have a combined income (before tax) of £37500. (me £26000 her £11500) if it matters?
Unfortunately I have a debt of £15000 (1 personal loan of £10000 and 2 credit cards £2500 each).
we have saved £2000 for fees and £10000 for a deposit.
The problem is that there is so much information and different types of mortgages that my head is burnt out!!
Can anyone recommend a mortgage provider which will swallow my debt with the mortgage (we have seen a house we like for £125000).

I have recently spoken to a financial advisor and he recommends a 125% mortgage which is flexible and interest only. that way he says I can pay off my debt then put any money we have left back into the mortgage.(the £10000 we have already saved for example) it doesnt make sense to me at all, why should I sacrifice my hard earned deposit money? (the rate is 5.99% by the way).
I want a fixed rate for 5 years and I want it to be a repayment not interest.

I basically want to know what to do when you are in debt but want a mortgage!!!

I hope any of the above made sense to somebody out there and I would appreciate any advice given.

Thank you.

ancasta_2

Personally id use the £10,000 saved up to pay off the loan but thats just my thoughts.

sparky3153

I thought of doing that but it still leaves the 2 credit cards which are at around 16% interest. that is my dilemma!

It also leaves me without a deposit which bumps the mortgage interest rate up so I end up paying more in the long term!

Fairdo_2

As ancasta said, is a very real option.

Paying off the loan would give you a few more choices, but you'd need a 100% mortgage and you'd probably have to find some more money to pay for the legal and entry costs.

I did a quick calculation with a lender that will actually ignore your loans and credit cards, giving you some freedom to do what you prefer.

Accord mortgages would lend you up to £125,500 based on the incomes you gave me and would ignore the credit liabilities.

The thing you would have to give strong consideration to would be whether you could afford the repayments with them all in place.

sparky3153

The loan is £230 and month and the combined credit cards cost me £120 a month (minimum payment). I think the payments on a £125500 mortgage (repayment) are around £750 depending on the interest rate so I'm looking a over a grand a month just in repayments!!

Joe_Bloggs

What interest rate is your personal loan ?. What term is this loan for ? It may make sense to threaten to payoff those cards and negotiate a lower lifetime balance rate or even transfer those balances to a 0% cards. If those card rates don't budge in your favour and if your loan rate is lower then pay off the one with the highest interest rate from your alleged savings. Try renegotiation again with the remaining card. Ultimately pay the cards off if it makes financial sense. You may be able to get the two card companies to compete against each other to offer you a lower interest rate if you play your cards right.
See here.

You are deluding yourself if you think you can borrow money for a deposit without any prospective mortgage lender finding out where it came from. Any prime lender that offers to ignore existing debt in which the resulting payments barely affect the capital owed, is in my view, irresponsible.
You only owe a net £3000. With sound moneysaving advice you could be in credit soon and in a better bargaining position. House prices should have dropped too.
J_B (Only my view and I am not a financial advisor.)

mountainofdebt

having a 125% mortgage????

I don't mean to be rude but if someone suggested to me that I take out a 125% mortgage I think I would have walked out there and then....and before you ask yes I had a 100% mortgage when we first bought a home and I would NEVER NEVER recommend someone does that, especially in light of all the talk of the economy slowing down.

Assuming you have a good credit record get yourself some 0% cards.....martin recommends which ones are the best ones in his article and when you've transferred the balances from the 2 credit cards, make sure that your payments are at the same level that they are now....by paying 0% interest and paying the amount you are paying now, you can pay off the cc debt in about a year.....I would never pay 16% for a cc having been on this site and knowing what I know now - and this is from a girl who used to pay 24.9% !

As for the savings v loan debate ....difficult one. If the APR on your loan is higher than you are earning on your savings then the general feeling is pay off the loan. However, I would get a settlement figure for your loan and check if there are any early settlement penalties.

I don't understand that you would be paying over a grand in repayments....if you have £10K in savings why not use those - either to reduce the amount you need to borrow on your mortgage or to pay off your loan.

What ever you decide please please do not have a 125% mortgage!

meanmachine_2

You have a loan of £10,000, and yet "savings" of £10,000?

Um, am I missing something here?

Sounds to me you don't have any net savings at all.

And I agree, taking out a 125% mortgage is crazy. Remember, lenders aren't your friend. They don't give a monkeys about you. all they care about is lending you as much money as possible then, when you can't pay, harrassing you to the ends of the earth until you pay up.

Pay off your loan, save up some more, pay off your other debts, then in 5 years time, say, think about buying a property.

Anything else is going to plunge you into even more debt. It's not the answer you want. And it's not the answer any "adviser" on here will give you. But it's the only moneysaver option I can see.