You know a mortgage will cost the same or less than your rent which you have paid without problems for years – so it’s obvious you can afford the mortgage.
But that isn’t what a mortgage lender looks at when they assess affordability!
A few years ago, lenders only looked at the size of your deposit, your credit rating and your income.
Now, in 2020, the “affordability calculations” look into your outgoings in detail. Your debts are an important part of this: credit card repayments, any bank loans, car finance payments, the size of your overdraft etc.
The mortgage lender will also be thinking ahead to when interest rates may go up in the next few years.
This doesn’t mean you can’t get a mortgage if you have debts, but your debts do matter.
Let’s look first at the three things that are most important to mortgage lenders and then at what you can do now and over the next six months to a year to improve your chances of getting the mortgage offer you want.
Contents
1) How big is your deposit?
A bank will feel much happier about any minor credit history problems you have had in the past if you have a good deposit.
With a low deposit, less than 10%, everything else has to be looking great if you want to get a good mortgage deal.
So should you borrow to get a larger deposit? No!
Although having a 10% deposit rather than 5% may make it look as though you can get one of the “best buys” on offer, in practice the extra borrowing is likely to mean that you will fail the affordability calculations so you won’t get a mortgage at all. Not a good idea.
If you have been saving in a Help To Buy ISA, make sure you know the rules about when you can get at the money because you can’t use it for the “exchange deposit”, only when you complete the purchase.
2) Check your affordability now
A good mortgage affordability calculator
Each lender has its own rules and these can differ a lot, see The dark art of mortgage affordability. One of the big advantages of going through a broker, is that they will have a good idea if you will pass Bank A’s affordability calculations or if you would be better to apply to Bank B.
But if you are thinking ahead to a future mortgage, is a good idea to get some feel now for what you may be able to borrow, without having to talk to a broker.
Most mortgage lenders ask for a lot of details when you make an application, including your other debt repayments, your childcare costs and your commuting costs. And they will want evidence about these costs, often asking three or six months bank statements. Many “mortgage calculators” are very basic and don’t ask the right questions to have a hope of giving an accurate answer to how much you may be able to borrow.
But try this Nationwide mortgage affordability calculator as it is pretty detailed.
How your debts affect affordability
There is a wide range here, from “it’s a big struggle and I have made late payments in the last couple of years” to “No problems, the car loan comes out when I get paid and I clear my credit card in full each month“.
If you are at the very easy end, then your debts are probably falling nicely every month already. Unless you have had debt problems in the past (see below for your credit record), you just need to carry on and make sure your credit record stays clean until your house purchase has completed.
If you know you are struggling to make debt repayments, the mortgage lender is likely to see that and you are very unlikely to get a mortgage. You need to spend a few years getting your debts down to more easily manageable levels.
If you are in a debt management plan you are also going to find it difficult to get a mortgage. You may be happy to carry on paying £5 a month to some old debt, but the mortgage company won’t like it. Even if your debts defaulted more than 6 years ago so they aren’t on your credit record at all, the mortgage lender will still care about them… read this article: Can I get a mortgage in a DMP?
If you are currently insolvent (you have been bankrupt, in an IVA or a Debt Relief Order (DRO) in the last 6 years) you probably won’t be able to get a mortgage or remortgage however large your deposit.
Many people will be somewhere in the middle – it would nice if your debts were lower, but they aren’t a big problem and you are coping with the repayments.
But it is the mortgage company that makes the judgments, not you.
You may feel comfortable that most of your credit card debt is on 0% deals, but a mortgage lender knows that if you miss a payment, then interest will start to be charged and that you may not be able to refinance it at the end of the 0% offer.
3) And also check your credit records
Why you should do three checks now just one
You should check your details with all three credit reference agencies. This applies even if:
- you think is fine as you have never missed a payment in your life; or
- you look at a credit report every month and its great.
There could be something on a credit reference agency you don’t check that is wrong – perhaps an incorrect link to someone else’s account, or a wrong previous address, or a debt you are unaware of from when you moved house.
An error on your file can take months to get corrected, so check now!
Finding an unexpected problem when you are in the middle of buying a house can often mean your purchase falling through. This really does happen to hundreds of people every year, see How a stranger’s £40 parking ticket cost family their new home for some stories.
If you have a perfect record, great! See below for making sure it stays that way until your house purchase completes.
How bad are different sorts of previous problems?
With a less than perfect record, how serious is your credit problem? Mortgage lenders usually rank difficulties in roughly the following order, starting with the most minor:
- late payment
- missed payment,
- AP/debt management
- default,
- CCJ,
- insolvency (IVA, DRO, bankruptcy)
And how old are the problems?
It isn’t just the type of problem that is important, it also matters how long ago it happened and when you sorted it out.
A debt problem that you have “solved” is much better than one that is still ongoing… so if you have defaults or CCJs on your credit record you have to settle these debts.
A settled default shows you had problems in the past. But any default which is still outstanding shows you still have debt problems – not good for your mortgage application.
Some lenders will reject any applications with defaults even if they are settled. But some high street lenders don’t mind past problems:
- if your defaults were more than three years ago
- and they have been repaid for more than a year.
So what the default date is on your credit record is really important as mortgage lenders care more about recent problems.
Also a defaulted debt disappears from your credit record six years after the default date. So if you have several old defaulted debts which you have settled that will be dropping off your record in September 2020, think about delaying any mortgage application until after they have gone. This will give you the widest choice of mortgages including the best deals.
Most lenders don’t like you to have had recent payday loans, even if these were paid back on time, see Payday loans make it harder to get a mortgage.
What is your overall picture like?
How good is your overall picture: deposit – affordability – current debts – credit record ? If it’s not looking good, then you are going to have to spend some time, possibly even years, improving it.
If it’s just about OK, could make some of it better in the next 6-12 months?
Read up about Snowballing, this is the fastest way to clear debt and it will also result in your credit record improving a lot.
Also read How to improve your credit record for a mortgage. Time is a great healer of credit records, adding six or twelve months of perfect credit ticks every month, combined with your credit card and overdraft balances falling can make a big difference. And if the default date for one of your debts looks a lot too recent, you should try to get this corrected, see What should the default date for a debt be?
10 tips for a trouble-free mortgage application in the next year
Once you know when you want the mortgage, you must do everything possible to avoid new problems appearing. So:
- don’t make any credit applications in the few months before asking for a mortgage, nor between getting an offer and completing. This includes not getting a new car on finance until after you have moved! If you have to, then keep the cost down as much as possible.
- if you have any 0% deals ending in the next few months, pay down that balance as fast as possible as you don’t want to have to refinance that just before a mortgage application.
- if you cancel any direct debit, double-check your account is clear first. Be especially careful if you change mobile contracts because they are a common cause of credit record problems if the last bill isn’t fully paid.
- make sure credit card balances are reducing and that you are paying more than the minimums. The mortgage lender can see not just your current balance but also your borrowing and repayment history. Ideally don’t spend on the cards at all if you are trying to reduce a balance.
- if you have several credit cards with a zero balance, think about closing at least one. If you are trying to show a mortgage lender that you won’t get into future debt trouble, getting rid of that spare card is a simple way.
- absolutely no payday loans in the year before a mortgage application. Even if you can repay it on time, many lenders see these as a sign of financial problems.
- if you have an overdraft, try to reduce it. If you don’t have an overdraft, make sure it stays that way!
- keep your “discretionary expenses” well under control. When someone says their recent bank statements aren’t normal because they went on a good holiday in November and then it was Christmas, the lender is likely to think that these things happen every year!
- don’t change jobs! This may not be under your control but if you have any choice, this is not the time to switch employers. If you do, you may have to postpone thoughts of a mortgage for 6 or 12 months or longer if you become self-employed.
- don’t change your name! It won’t stop you getting a mortgage but it can cause temporary problems on credit records so why take the risk. If you have just got married, leave changing the name on your accounts until after you have moved.
Getting that mortgage – who and how to apply to
Unless your credit record is great, it’s good to go through a broker who should be able to advise which lenders will be happy with your credit record.
Every lender is different. Not only do they use their own assessment calculations, but some are more flexible than others. Some high street lenders adopt a Computer says No approach to low and average deposit loans if you have any recent credit record problems at all. If you have a very large deposit, some lenders may be more willing to accept an application with recent problems.
Contacting banks individually can waste a lot of your time and any rejected mortgage application will leave a ‘footprint’ on your credit record. So if any of the following apply, consider going to a mortgage broker instead:
- you have a low deposit;
- you need a large loan in relation to your income;
- your credit history isn’t very good; or
- there is anything unusual about your situation.
Money Advice Service’s article on Where to go for the best mortgage deal has good advice on finding a broker.
35-40 year mortgages – be careful!
95% mortgages – what you need to know
Help to buy – what happens after 5 years?
Emma c says
Hi, my husband and I are looking at buying our first home. We both work full time and have a combined salary of £47,500. We have a deposit of 15,000 and are looking to borrow around £120,000. My question is, we have combined credit card debt of around £10,000 of which we pay more than min payment. My husband had been offered a low interest personal loan with his bank at Halifax and we wonder whether having one personal loan would be looked at more favourably than multiple credit cards. We both hame fair/good credit history with no CCJ or arrears
Sara (Debt Camel) says
Why is one of your credit scores only fair?
Emma c says
I’m not sure if they are technically fair. They are both around 470 on clear score. No problems that I can see, just high utilisation I think
Sara (Debt Camel) says
So taking this loan would get rid of the high utilisation problem. Ideally you would want to clear all your credit card debt (unless any is at 0% interest?) and close some of the cards, leaving you each with one card (preferably an “old” account as that is best for your credit score and prefereably an account with a lowish rate of interest, in case you ever need to borrow on it) that you use every month for something small and repay in full. That is the best way to maximise your credit scores..
There are a few potential problems with it now though.
1) the slippery slop to RUIN. Nice and dramatic? That is because consolidating credit card debt onto a loan often turns out like that! If you do this you must close some of your credit card accounts and stop using the remaining cards. If you don’t, the chances are that in a couple of years you will still have most of the loan left and will have a high utilisation on the cards agin. With a first home there is a huge temptation to recarpet, get more furniture, put in a better shower on the credit cards…
2) how high will the loan repayments be compared to your current credit card payments? My guess is they will be higher, which could affect the mortgage affordability calculations. the bare figures you gave sound as though you should be ok, but do stick all your details into the affordability calultor linked to in the article above, to make sure.
3) timing. If you have seen a property and are hoping to make a mortgage application asap, then this isn’t a good point to be taking out a large new loan, paying off all your credit cards and closing some of them. It will take a couple of months for your credit records to reflect all the changes. and even then your credit scores may not pick up for another couple of months. Now mortgage lenders don’t use exactly the same scores that you can see, but it’s never good to be making new credit applications close to applying for a mortgage.
If you are very close to needing a mortgage, I suggest you talk to a good broker now about whether this loan would be a good move.
Hat says
Hello,
I have a defualt of £609 and it is being removed from my credit rating as it was fraud, how much will my credit score go up by ?
Thank you
Sara (Debt Camel) says
That will depend on what the rest of your credit record looks like. See https://debtcamel.co.uk/credit-score-change/ for some numbers.
Hetty says
Hello,
I have 2 old defaults one for 50 pounds and one for 250. These were taken out in my name. I have disputed many and got them removed but not them 2. They were both paid 1 year ago plus.
Will i be declined for a mortgage, my credit score has been affected but me and my partner who has good credt want a house
Sara (Debt Camel) says
with two old, small defaults that have been repaid for more than a year you may be OK to get a mortgage at an OK rate. But go through a broker, not direct to a lender.
Charlotte says
Me and my husband are looking to buy a new home, we have £40k equity in the house, no other savings but £18k on a credit card and a £7k on car finance. We have never missed a payment or defaulted, always pay on time and higher than the minimum payment. He has changed jobs as of December. How likely are we to get a new mortgage and also how much?
Sara (Debt Camel) says
18k on a credit card? ouch.
Are you looking for a larger mortgage than you have now?
Your husband only just having moved jobs could be a problem. Some lenders will prefer him to have got through the probation period at his new firm.
I think you need to talk to a broker. If they advise you have to wait a few months, can you blitz down that credit card debt then apply?
Rachael says
Hi my husband and I both have debt we are struggling to repay around 10k over the last 5 years we both got into bother when my husband was made redundant and we had our baby. We created this debt about 4/5 years ago and the majority never paid back w,e have tried our best. How long does this stay on our credit reports and will a mortgage broke.r see this when off the report if never paid?
I often get extremely depressed about our situation as we have 2 children and renting last year our landlord sold the house and we found it difficult finding a new home now paying £800 a month so paying off debt is getting impossible. We have seen houses that would be half this mortgage repayments but feeling like it’s never going to happen. We live in northern Ireland so even more limited options
Sara (Debt Camel) says
Has all the debt been defaulted? Are you making Any payments to it?
Sara (Debt Camel) says
Rather random question – has anyone here has a letter from their credit card company talking about “persistent credit card debt”? It may have suggested you need to increase your payments?
Katherine says
My 23 year old son is the sole beneficiary of his uncles will, the house that his uncle lived in is worth £110,000 and there is an Equity mortagage worth £45, 00. With the other debts that would come to around £50,000 that needs to be paid to creditors. My son has an overdraft of £200 and has recently been unemployed for 2mths but is now working. Would he be able to get a mortgage for £50,000.
Sara (Debt Camel) says
how much is he earning? is the house in a suitable location for his job? how large is the house, could he rent out a room or two?
Molly B says
Hi there,
I currently have a mortgage of £50,000 on a property that i have currently renovated which the property is now worth £160,000. I have a loan debt of £7,000 and car finance of £4,500. I am looking to buy another house from a family member for £130,000. I earn £24,000 a year and im a director of my limited company. I have an excellent credit report (experian) with no missed payments, defaults etc.
My question is, am i better off selling my property to pay off my loan and car out of the £110,000 equity before i proceed with another mortgage?
Sara (Debt Camel) says
The housing market has pretty much stopped at the moment. You are unlikely to be able to seel your house or get a mortgage on the other house as surveys aren’t being done with everyone in lockdown.
If you don’t sell, you would presumably rent the current place out? I can’t give advice on that alternative except to say that the tax breaks are a lot less generous than they were before.
Olga says
I got a debt in my sons name of 300 pound I pay 10 a month will this affected if he gone for a mortgage
Sara (Debt Camel) says
So you are paying less than the normal monthly payment? This loan may be marked as defaulted on your son’s credit record which will make it much harder for him to get a mortgage.
Stephanie says
Hiya my partner brought out house 2 years ago and a family member had to go on the mortgage as my credit score was too low we have to remortgage in August and I have £4000 on a credit card but my credit score is 730 now am I going to be able to get in the mortgage?
Sara (Debt Camel) says
So your partner now owns the house jointly with a family member who is happy to be removed from the deeds and for you to own the house jointly with your partner?
If that is right, I suggest you and your partner need to talk to a mortgage broker about whether you two can get a mortgage. There is no “magic number! for you credit score that mean you definitely can.
Mina says
My daughter has around 30,000 of debt, she has to sell her house, as her and her partner have split up, they have a daughter of 10 who lives with her. When the house sells she will clear all her debt? She will have around 40k for a deposit! Will she ever be able to get a Morgage if so how long would it take? As private renting is lining someone’s else’s pockets.
Sara (Debt Camel) says
She will have around 40k for a deposit!
Is this her half of the equity?
I assume all the debts are in her name, but are some of them really “family” debts so there is a case for her ex to clear some?
what is her credit record like at the moment, have a lot of the debts been defaulted? if yes, how long ago and have they been sold to debt collectors?
Jemma says
Hi Sara,
I have been paying down a large amount of debt via a DMP, in the next 12 months I will be in a position to offer full & finale settlements, all my debts barring one (capital one credit card) were defaulted 3 years ago in November and have been sold to debt companies. It’s been a rough few years following the breakdown of my marriage and I’m due to get divorced the end of this year. At some point I will need to buy my ex out of the house, I know currently this will be impossible my credit score is very poor and I have 25k of outstanding debt. What I want to know is will F&FS make my mortgage chances worse or better? To me it makes sense to pay the debt up quicker but I’m worried about securing a mortgage in the future to give myself and my daughter a secure future after going through such a rough time. What would be your thoughts?
Thanks
Emma
Sara (Debt Camel) says
so you own the house mortgage free at the moment?
Jemma says
No, it’s mortgaged in joint names with my ex. I now pay the mortgage and have never missed a payment
Nathan says
I’ve put my self as a vulnerable customer with my bank, few months as I use to take depression tablets and made , a complaint about hold times first every compliment with them.
Now I’m thinking why did I ever tell them I thinks it’s pointless and may even have a detrimental effect to me, Should I ask to remove me as a vunnruble customer?, and will they do it.
How do they treat me differently?
Will this affect me if I apply for mortgage in future?
Do they pass information on, to anyone?
Also it’s been over 8 years and I have had debts with certain banks that were sold on , can I apply with a mortgage through them and can I open a bank account with them now
Sara (Debt Camel) says
It should not affect your chance of getting a mortgage in future, that would be an unfair practice by the bank. And no, they should not inform anyone else, that would be breaking data protection rules.
Also it’s been over 8 years and I have had debts with certain banks that were sold on
have these debts now been settled?
Nathan says
Thank you for your answer
Can they remove me as a vunruble customer by my request, as it just gives me peace of mind and I see no benefit to it
The debts were sold on some I’m still paying back to company they were sold on to
Others are paid off, but at the time they were sold off.
Sara (Debt Camel) says
Can they remove me as a vunruble customer by my request,
That may depend on the bank’s policies, sorry I don’t know.
The debts were sold on some I’m still paying back to company they were sold on to
You would need to settle these old defaults at least 6 months before applying for a mortgage, even though they are no longer on your credit record.
But you should NEVER apply for a mortgage to any lender you have previously defaulted to – they may be able to see from their internal records what happened in the past. When you need a mortgage, go through a broker and tell the broker about the lenders you previously had problems with.
Nathan says
Why would I need a broker can’t I just go to a bank I never had debt with, what do brokers do?
Also if you get rejected can’t you just go to anthore lender or being rejected effects it?
Also I can’t rember all ones I had problems with as no longer on credit file and paid off how can I check?
Sara (Debt Camel) says
Why would I need a broker can’t I just go to a bank I never had debt with, what do brokers do?
Brokers are good at working out who is most likely to give you a mortgage.
Also if you get rejected can’t you just go to another lender or being rejected effects it?
being rejected wastes time and that may mean you lose the house you want. It also shows on your credit record as a credit application, which may make the next lender you approach concerned.
Also I can’t remember all ones I had problems with as no longer on credit file and paid off how can I check?
I suggest you put some time now into trying to remember as many as possible. This is another good reason to go through a broker, they may know perfectly good lenders you may not think of, eg some building societies.
Bill says
Hi, I’m already on the property ladder, looking to upgrade. If I sell my house for 115k I’ll have equity of around 35k for a deposit, I earn around 38k a year, would a 200k house be out of reach or not?
Sara (Debt Camel) says
Assuming your credit score is ok, it may depend what the rest of your finances are like – do you have car finance? Other debts? There is a calculator here https://www.nationwide.co.uk/products/mortgages/our-mortgages/mortgage-calculators/mortgage-affordability-calculator. Then talk to a broker.
Bill says
Credit score is excellent, will have no debts except a mortgage of £410
Sara (Debt Camel) says
So look at that Nationwide calculator. If that says they wouldn’t lend that much, talk to a mortgage broker about lenders that might.
Sammie jo says
Hi Sarah,
I was wondering if you could advise me please, I’ve gone through my credit report and gone through some of my missed and late credit card payments and next online, then gone through my credit card statements and my bank statements to find that I was reported as late on my report Numerous times but Paid less than the 30 days after it was due?
For example Barclaycard was due the 31st October I paid the 12th November recorded late
I no at the end of the day I shouldn’t of paid late I understand that it was really silly just lack of organisation but I was under the impression it was not recorded until it was over 30 days some of them are 23 days late/12 days late and I’ve only looked at barclaycard and next online atm.
This is really damaging my credit report atm! Do u have any advise on what I can do or if I can do anything?
My husband and I are looking to move house and I’m really worrying that We won’t be able to get another mortgage with these silly late payments .
(I haven’t missed or been late with a payment since December and are paying down balances my total amount of Debt is £3500.) which will be gone by the time we move apply for a mortgage. As my uncle is giving me some money.
Husbands income is like 50k, mine 14k we are looking at buying a £350,000 with a £130,000 deposit (equity) my husbands report is clean!! Never had any debt! Never missed a mortgage payment !
So the affordability is no problem at all
Cheers
Sara (Debt Camel) says
For example Barclaycard was due the 31st October I paid the 12th November recorded late
That is a late payment!
if it just happens once sometimes a lender will agree to remove the marker. But the point about credit records is to show how good you are at handing credit and making late payments a lot is something a future lender will be interested in.
Clearing the debt balances will help and the sooner the better. Then you need to use a card once a month and set up the card to repay the full balance automatically every month so you cannot miss a payment.
I think you should talk to a mortgage broker now about the chance of getting a new mortgage. It may be better to wait another year so all the missed payments are much further in the past.
Dan says
Hi there I have a quick query I am going to be applying for a mortgage with my partner soon I am on a dmp with stepchange I have a a member of missed payments and defaults so it is more than likely I will be declined. So the plan is she will take out the mortgage in her name and a few years down the line we will be going for a joint mortgage I was sequesteated back in 2010 do mortgage companies check this after 6years and will I need to tell them
Sara (Debt Camel) says
So the plan is she will take out the mortgage in her name
she can pass the affordability checks on her income alone?
do mortgage companies check this after 6years and will I need to tell them
It is common to ask if you have ever gone through insolvency. And if a variation on that is asked, yes you have to tell them. It is possible to get a mortgage after insolvency but you will need a very clean credit record.
Dan says
Hopefully she can we are going to speak to the advisor on Friday . How do you mean a variation ? The likelihood at the moment I would be declined due to my credit score etc , and where is the insolvency recorded after 6 years as it is no longer on my credit file hence the reason I am querying this .
Sara (Debt Camel) says
By variation, I mean some other words are used which mean the same thing.
The insolvency may not longer be on your credit record but you still need to answer questions about it accurately.
Orlz says
Hi there,
Myself and my husband are sale agreed on our property this week, making 33k in equity.
We have a joint income of 42k and are looking to borrow between 130-140k to mortgage our new house.
I have a car loan of 7.5k and we have a joint credit card of 2k.
My credit score is 522 out of 700 and I’ve never missed a payment for anything.
What would be the best action to ensure we achieve the mortgage we want?
My partner is self employed, so this will be the first time he’ll be named on the mortgage.
Thanks,
Orlz
Sara (Debt Camel) says
I hope your partner has a couple of years of audited accounts.
You should have more than 15% equity so I hope you will be OK, the current mortgage market is difficult for 10% or less.
Best advice:
1) both of you need to look at your credit reports with all three of the credit reference agencies to check for errors / nasty surprises – see https://debtcamel.co.uk/best-way-to-check-credit-score/
2) make sure you pay more than the minimum to the credit card every month
3) don’t apply for any more credit at all
4) go through a broker.
stephanie says
Hi i am looking for some mortgage advice please.
I am currently saving for a deposit and aiming for 10% / £17,000 deposit for £170,000 property.
I earn £47,000 per year + £6,000 car allowance + 15% bonus each year.
My partner earns £23,000 per year.
I don’t have the best history. 8 defaults between 3 and 5 years old totalling £2500 (all cleared)
I also have a history of payday loans and missed payments on a mobile phone contract from 18 months ago.
My partner has no defaults but does have some later payments on credit cards c. 15 months ago.
Do we need to speak to specialised lender? Also would we be better using the government help to buy equity loan to increase our deposit?
Many thanks
Steph
Sara (Debt Camel) says
That is not a good payment history.
At the moment a 10% deposit is an absolute minimum. Most mortgages require 15%. The 5% mortgages have all gone and most big lenders are stopping the 10% deposits are they are worried about house prices falling. This may change over the next 6-12 months, but now is the most difficult time to get a mortgage for 10 years.
I think the best thing is to assume you will have to wait at least 6 months probably a year before trying to get a mortgage. during that time both your payment histories have to be squeaky clean. No payday loans of course. And generally reduce the amount you owe on any current debts, including overdrafts.
I am never a fan of bad credit mortgages. Specialist brokers say you will be able to remortgage in a couple of years onto a better rate. But that may not be possible! especially if house process fall because of coronavirus. I have seen too many people who took a bad credit mortgage who were then unable to remortgage and had their bad credit lender increase their mortgage rates in 2008-12 at the same time as everyone else saw their mortgage rates dropping… These mortgages can be a trap in difficult times.
I don’t know what is happening to the HTB mortgage lending market. Also the main effect of HTB has been to push up the prices of new builds. So in 5 years time when you have to start paying the government for their share, you may find that you have negative equity and cannot remortgage or move if you need somewhere larger or in a different place. See https://www.thesun.co.uk/money/10089081/first-time-buyers-help-to-buy-pay-more-new-homes/
Stephanie says
Okay thanks. I have no outstanding debts and my partner has nearly cleared his credit card balance. We’ll continue to save and revisit early 2021.
G says
Hi,
Between my wife and I we earn £90k.
We’re looking to buy our first place and we have saved nearly £30k.
By September, I will have reduced my credit card debt to about £10k (embarrassingly it was way worse) but this year I have managed to chip away at it.
Never missed a payment. No other issues.
ClearScore is at 431 and I’d only expect it to increase.
For various reasons, we need to be looking to buy a place from September onwards, and we’re looking at
With 10k of debt to my name, are the mortgage lenders likely to even entertain us?
Thank you for your time in advance.
Sara (Debt Camel) says
Do you have any problems on your ClearScore record? That isn’t a great credit score. How large a % deposit will you have?
G says
Thank you for the reply.
No problems on my ClearScore report; I think the score is where it’s at purely down to my credit utilisation. I think my report should significantly improve next month as I have paid a considerable amount off in the last few months. By this September I expect to be down to circa £10k.
Deposit wise, hoping for 5-10%. Aware that 95% LTV mortgages have been retracted but, given our earnings, will the £10k in CC debt ruin any chance of even being considered for a mortgage?
Thank you.
Sara (Debt Camel) says
The amount of credit card debt mainly matters because it impacts on affordability.
But not only are there no 95% mortgages, there aren’t that many 10% ones either at the moment.
RonnieB says
Hi Sara, I’ve spoken with you in the past about our situation but the poster above prompted me to get in touch again. We were in a DMP which finished in June 2017 and we have 3 defaults on our file which are all at least 3 years old now. We are completely debt free and sold our house in 2018 and are currently renting (we needed to sell as we ran out of room). Some months back we looked into getting a mortgage but our childcare was deemed too high (£800/month). Now due to Covid we don’t have any childcare and our youngest child will start to receive her 30 hours free in September, however, now we’re faced with the issue of not getting a 10% mortgage (our deposit isn’t massive). We did consider HTB but it looks from what you’ve written above that this won’t be possible/advisable now. We’re managing to save a little each month (£500) to add to our deposit but is there anything at all we can do? We’re so keen to get back on the ladder and feel like time is wasted the more we rent. We have a combined income of £72K and currently a deposit of £20K.
Sara (Debt Camel) says
I said
“Also the main effect of HTB has been to push up the prices of new builds. So in 5 years time when you have to start paying the government for their share, you may find that you have negative equity and cannot remortgage or move if you need somewhere larger or in a different place. See https://www.thesun.co.uk/money/10089081/first-time-buyers-help-to-buy-pay-more-new-homes/“
Provided you know the risk, you may decide you don’t care. If you aren’t going to have more children so you know the house will be large enough, negative equity can matter less in your “forever house” – it’s most dangerous for people who will want to move as their families grows.
RonnieB says
I see. Do you know if HTB mortgages are still available at 5% or are there fewer available given the current circumstances? I’d like to know if its worth us moving now or waiting another year and risk it still being the same.
Sara (Debt Camel) says
HTB mortgages are a specialist area – you need to talk to a broker about them.
Nina says
Hi Sara,
My partner and I are looking into buying our first property but I am unsure how bad my previous late payments on CC will affect this.
I have around 10 late payments on various credit card from 3-4 years ago having been young and stupid and building up debt. I have worked hard to bring this down from 15k to around 7k in the last year or two and would hope to get this down to 0 the time we come to buy (in a year/18 months).
I earn 34k and my credit history has been faultless the last few years with no markers on my credit report (no other loans and car is paid outright etc, rent has never been missed in 5 years) so my credit score has improved greatly but I am very conscious that 10 is a large amount of late payments on my credit history although there are no defaults or anything more serious.
My partner earns 48k (700 a month approximately is from his war pension which isn’t taxed) – he has a faultless credit history and no outstanding debt at all.
We have around 40k deposit to put down (this will be a mixture of his savings and gifts from both parents).
Do you think my adverse credit history 3+ years ago will stop us getting a mortgage from high street lenders?
Many thanks
Sara (Debt Camel) says
In a year/18 months the last of your problems will have been 4-5 years ago? I can’t predict what the mortgage market will be like at that point, but in normal times you would probably be OK.
Do go through a broker though, don’t pick a lender and apply direct and risk having picked one of the fussier ones!
Isabelle says
Hi my name is Isabelle,
I am 22 years old I have come into 30k inheritance and so has my mum making that 60k, my mum is 54, we would both like to get a mortgage together, we are happy to put 60k down for the deposit and would be lending 140k to buy a 200k house, is this possible given my mums age? And she does have ccjs and I have some debt that amounts to just under £1,000 but I have no ccjs. My mum is willing to clear all of her debt off completely which hers amounts to £5,000. Would appreciate some advice?
Sara (Debt Camel) says
How much do you earn? How much does your mum earn?
Isabelle says
Both combined together £2,944 per month
Rhys says
Hi,
I have been operating in my overdraft limit of £2000 for the last year now, without ever really being in a positive amount. I also have a fair credit rating, supposedly because I have never had credit. My partner I and have been able to pay rent and other bills with no problems at all. Will our joint mortgage application still be rejected because of me always being in my overdraft? We would be able to afford repayments as they would actually be cheaper than the rent we are currently paying.
Sara (Debt Camel) says
How large a deposit do you have?
Rhys says
We are lucky in that we have £100,000 deposit
Sara (Debt Camel) says
I assume you are being given this? Can you suggest to whoever it is that you need to clear your overdraft NOW with a few thousand of this?
Rhys says
I suppose I could ask, will a lender look to see that I was in my limit before?
Sara (Debt Camel) says
yes but the sooner you are out of it the better!
Simon says
I’ve extended my payment holiday to extra 3 months with 2 different lenders total 6 months, they have confirm this won’t effect my credit rating.
In 2 years I’m looking to get a mortgage will this prevent, it?,
Because they said future lenders mite asked for old borrowings, then I will need to show them that I had 6 months break.
If it’s fully repaid off by that time will it even matter?
Also if I’m married is it easier to get a mortgage?
Sara (Debt Camel) says
I can’t really guess what the mortgage market will be like in two years time!
But it’s a fair bet that if you have repaid the loan or credit card and haven’t taken out any more credit then a lender will be less concerned as you will clearly have had a acoupl of good years.
Having a partner will usually make a mortgage more affordable. being married to them isn’t that relevant.
Lisa says
I am applying for a mortgage but have had in The past pay day loans, credit Cards, I have one active loan, I have spoke to an estate agent who deals with mortgages, he has done a scan on who would, borrow the amount I need, he found one which would borrow me the money I have a £100,000 deposit to put on but I did t tell the man about my one debt I pay each month, could that stop the bank that said would borrow it me, not finalise it, or would my deposit help, the house is £168.000.
Thank you
Sara (Debt Camel) says
your current loan – is it a payday loan?
How long ago were your other payday loans?
Sam says
Once I have cleared all my debts about 12000, how long will it take to improve my credit record, to the level you need to get a mortgage?
I have no ccjs or defaults, but I do have missed payments
Looking at 10k deposit for 90k property
My parents may help me pay my debts so I can get a property this year
At the moment my rating is very poor, how long will it take to get too good once by debts are cleared or if I’m making regular payments?
Sara (Debt Camel) says
How long ago were the missed payments?
Sam says
Recent within last few months
Also I took out lots of payday loans within 6-8 month period there all paid expect one
Will lenders look at this and think him taking out loss of payday loans shows he can’t manage his money.
Sara (Debt Camel) says
I think it’s very unlikely you could get a mortgage at an OK rate in the next year with recent missed payments and payday loans.
The rule of thumb for payday loan used to be that you needed to have had a year free of payday loans. Recently a couple of the big mortgage brokers are saying they won’t take on clients who have had a payday loan in the last 2 years, see https://debtcamel.co.uk/payday-loan-mortgage/.
And the rule of thumb for missed payments used to be none within the last year.
You need your debts repaid asap and you then ned a period where you are squeaky clean about no missed payments. no payday loans and not taking on credit except for using a credit card and repaying the balance in full every month.
Whether that period will turn out to be 1 years or 2 years may depend on how the mortgage market goes in 2021, but the sooner you start it, the sooner you will get to the end and be able to buy a house.
Sam says
Thanks and then will I need to go through a broker or can I go directly to bank or estate agent?
After 2 years if my credit record is squeaky clean, it should b easy to get mortgage
Thanks
Sam says
Also I’ve had lots of diffent banks probaly been over 10 years now so not on my credit file with defaults etc, there is no chnace they will give me a moragte ever?, how can I find lost of all banks I had?
Sara (Debt Camel) says
I can’t predict what the mortgage market will be like in future. I think you need to wait at least a year and then talk to a broker about situation then.
Sara (Debt Camel) says
Always go through a broker and say as many of the banks as you remember having problems with.
Sam says
Last thing if it’s paid of this year and I apply for mortgage next year, and assume market is same as this year, is one year enough for payday loan to be off file…
Also normal loans how long do they have to be off file, they have missed payments but no defaults
Sara (Debt Camel) says
Sorry, this is pointless. The current market is in a state of flux. I do not have up to date information. Even if I did. it really wouldn’t help you to know what may happen in a years time.