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.
Charlotte says
We would like to remortgage to pay off a 2nd charge mortgage. We have a house worth approx £350k. We owe £245k on our mortgage and the 2nd charge mortgage is £44k. We took this out a couple of years ago to repay house renovation debt as it was cheaper than paying an early repayment charge on our mortgage. We are struggling to find a lender that will let us remortgage to pay off debt even though our outgoings will be lower if we could merge the payments together. We also owe £14k on a credit card. If we could remortgage we could increase our monthly payments on this. We don’t want to move house but weirdly that might be our only option as we could then pay off our debt and get a new mortgage.
Sara (Debt Camel) says
Do you have problems on your credit record?
Have you taken any payment breaks because of coronavirus?
What is your affordability assessment like – use the link in the article above to check.
Charlotte says
We have never missed a payment on anything. My credit score isnt great at the mo as yes took a 3 month payment holiday and have a high % use of debt available. Also always lived in our overdrafts although we could use some savings to get out of that now. Husbands credit score is good as the debt is in my name. We just dont understand how a bank can say we cant afford it when borrowing more by remortgaging will make our payments lower (more affordable) even though the amount borrowed is higher but we could sell and buy and do it anyway? Are there particular mortgage companies that do let you remortgage to pay off debts? And is a 2nd charge mortgage classed as a mortgage so if we just remortgaged our house as it is we would have a LtV of less than 70% which gets us a good rate and then we could use the extra money saved to pay the 2nd charge one quicker or do we have to declare it as being included in our LTV when remortgaging?
Sara (Debt Camel) says
We just dont understand how a bank can say we cant afford it
Is this just your current lender or a different one?
To a mortgage lender your position doesn’t look great – a huge secured loan and a large credit card debt you have had to take a payment break on. And all mortgage lenders are making fewer offers at the moment.
Have you looked at how you could try to get the credit card debt down? Have a tough few months not spending anything except on essentials? Look at your finances and see where you can save bits here and there and pay them all off the card, see https://debtcamel.co.uk/money-detox-seven-easy-steps/?
Dani says
Hi Sarah,
I’m wondering if you’re able to offer advice
We have just filled out details to a mortgage advisor and waiting to hear back but I don’t want to get my hopes up.
My partner owns our flat out right and we are looking to sell for 180-200k which we will use for a deposit.
My credit score isn’t great, I’ve been working on paying off my debts for the last few years as previously had some payday loans and got into some financial trouble.
I haven’t had a payday loan in 2 years, but do still have debt of about £1000 that I’m paying off.
Combined we earn approx £63k a year and my partner has a faultless record, will having a large deposit help mitigate my poor credit score or is it likely we will be declined?
Thanks
Sara (Debt Camel) says
You have defaults on your credit record? When were the defaulted loans repaid?
Sam says
My aim is to get a moragte end of next year, due to overtime I’m getting large lump sums every month to pay towards debt
Not sure which debt to pay of next
Aa credit card -1600 – pay all off
Nationwide loans arres pay 700(just pay of arrears to improve credit rating)
Likely loans over 2000 over 3000 with intrest, (reason to pay them of first is too pay less intrest)
I’ve had numerous payday loans all were paid fully on time or early, have none now..how badley will that affect mortgage application for next year, last one paid of a month ago.
Reason I’ve had so many payday loans I’ve been victim of fincial abuse…can this be use to remove of my credit file, if this abuse never happens I would be debt free good rating and have a mortgage now, through no real fault of mine I’m in a mess,
Sara (Debt Camel) says
How large a deposit do you expect to have when you apply next year?
Do you have defaults on your credit record? How long ago were they added? Have they all been repaid?
At the moment it is hard to get a mortgage if you have had a payday loan in the last two years.
Sam says
Minimum 10k deposit – maximum 20k deposit. Minimum 10% maximum 20%
No defaults just missed payments, on normal loans payday loans no problems
All payday loans repaid above are the only other loans I have.
So by time I apply for morgagate it will be 1 year 5 months since my last payday loan
Sara (Debt Camel) says
I can’t really guess what the mortgage market will be like end next year. At the start of this year you could probably have got a mortgage with payday loans all over a year old and a 10% mortgeg.
Now post-pandemic, there are hardly any 10% mortgages and most lenders want you to have been free of payday loans for 2 years. So all you can do is look and see what the market is like in a years time.
With those debts, assuming they are all going to get cleared soonish, it;s just the order, i would clear the arrears on the nationwide loans first, then the likely Loan then the credit card. But this is more instinct, there isn’t any set rules on this.
Good luck!
Mary says
What I good article this has opened my eyes so interesting
But here is my case senario will you be able to help
I am planning to buy a house worth £150K have deposit £15k NEED TO BORROW £135k
My salary £37k before tax same employer for10yrs
I child 11yrs
My credit score 559 with credit karma affected by CCJ of the phone bill of £410 which went to my old address before I realised it was too late settled immediately back March 2016
Have car finance 6k which I am paying off
Two credit cards worth £2600 which I pay off every balance I spend every month in full.
No any other dept
Am I likely to got this morgage because of my credit and dept plus my income as I am on my own.
Mary
Sara (Debt Camel) says
What date was your CCJ?
Mary says
It was late 2015 but I remember I paid off early 2016 around March
Sara (Debt Camel) says
There are VERY few 10% deposit mortgages araounf at the moment. You are very unlikely to get one with a CCJ on your record.
That CCJ will drop off your credit record 6 years after in late 2021. At that point your credit score will improve a lot. And your car finance remaining will have fallen too.
Mary says
Thanks for your advice much appreciated
Mary
Paula Clark says
Hi Sara
I really need advice I have to buy my ex husband out of my home by December. The trouble of a I can’t seem to get a new mortgage
My credit score is poor I was in mortgage arrears for 2 years, but always in an arrangement to pay it back these arrears have been clear now for 4 months but no mortgage companies seem to want to touch me.
I would have a 50% deposit on a new house but it seems me and my children will be living with my parents soon as my house is now sold and I can’t afford to rent as it’s much more expensive than my mortgage ever was
Sara (Debt Camel) says
These are very difficult times to get a mortgage. I can’t suggest anything, unless your parents are in a position to act as guarantor or to get a mortgage themselves and give you the money so you do not need a mortgage.
John C says
Hello Sara,
My parents are selling a property they own in Ireland and have offered to put down a deposit on a flat for me, as I am currently living in a property they own in the UK and they want to move back into it. I have recently come out of a relationship and have not got any savings currently. My parents are not charging rent but I cover all the bills and other running costs of the UK property.
A deposit for a flat around here would be £10-12k. However, I am concerned as I have unsecured debts of £16000 currently. My credit rating is excellent however as I have never missed a payment. If I had to pay a mortgage plus my debts, I would be left with very little to live on and would have no real capacity to save.
Is it possible to get a mortgage that would allow me to include my unsecured debts? I know that interest overall would be more expensive, but it would mean that I would be able to afford the monthly payment for the mortgage quite comfortably. The unsecured debts were a result of bad financial decisions some time ago, but my salary is sufficient to meet my costs at the moment. However, this may not be the case if I had to pay the mortgage and the debt payments too. I am reasonably confident that my job is secure so my earnings will remain consistent.
Thanks!
Sara (Debt Camel) says
That sounds difficult. How much do you earn? How much do these flats cost? Are yiur debts currently dropping fast?
John C says
Salary 50k, after tax per month £2800. Outgoings including debts are about half of that. Debts are dropping steadily – about 2 years before being debt-free.
1-bedroom flat 90-100k here, parents willing to put up a deposit. They are moving back to the house I live in and I would have to rent elsewhere which will scupper any chances I have of saving for a deposit myself.
Sara (Debt Camel) says
No lender is going to let you borrowe 16k more to clear the unsecured debt – that would mean effectively there is no deposit.
Also it is VERY hard to get a 10% deposit mortgage at the moment on a flat. Can you talk to your parents about this?
John Caulfield says
To be honest, I am not that fussed. I am happy to tell them not to bother – I don’t really understand the obsession with home ownership anyway. You have confirmed what I thought would be the case. Would rather be debt-free and have the flexibility of renting. If anything I would rather use the money to help pay down a big chunk of my debt, but they see home ownership as more important and probably wouldn’t go for that idea.
Nigel says
I am paying off people no longer on my credit file well over 6 years will this affect morgatge application as can be seen on bank stament.
Also banks I had beet with over 10 years ago who have sold debt not on credit file..no chnace I can get a moragte with them, because I work for the same bank I had debt with they gave me a permanent job.
Sara (Debt Camel) says
Yes, a mortgage lender will see those payments so they will know you are repaying debts still.
How large are the debts you still have to pay? What sort of debts were these originally – credit cards, loans, overdrafts, mobiles….?
Nigel says
Few are only few 100, biggest one is university 1700, where I dropped out, I owe the actually university.
Loans credits cards and mobile phone and one university and one jobcentre overpayments
How difficult to get a moragte with, good credit rating no debts other then ones from over 6 years ago which still being paid back.
Also does student loan affect it?
Sara (Debt Camel) says
I think you will struggle with these debt repayments being made. Ideally you want them all settled 6 months before a mortgage application so the lender will not see them when they ask for 6 months bank statements.
You could try offering full and final settlements to them to get them settled more cheaply?
A student loan you are repaying affects the income you get so it will affect what you can afford to pay to a mortgage.
Nigel says
They should all be paid of 6 months before I get a moragte
The university won’t give me a full and final settlement figure they want full amount
I don’t earn enough, for student loan to come out my account, at the momment it has due to overtime
Nigel says
Hi
I am confused hopefully you can help.
I am on a payment holiday with nationwide, ending this month.
I called them to clear the arrears I had before the payment hoilday, they said they can’t see this.(there’s no defaults or payment plans)
They said arrears will stay on my credit file for 6 years, and once payment hoidlay ends they can rewrite the loan
So is there any point clearing the arrears?, once payment hoidlays finsihes, or when they rewrite the loan will that automatically clear the arrears?
I want to do what’s best for my credit file, if clearing arrears doesn’t make a difference then no point
Thanks
Sara (Debt Camel) says
Is this a mortgage payment holiday or loan or credit card?
Nigel says
2 x personal loans with nationwide, this is the last month month 6
Sara (Debt Camel) says
So if they can’t see any arrears, but you know there were some when the payment holidays started, it’s hard to know what to say!
Are they offering to rewrite the loan so it is longer but the monthly payments are the same? If you can now afford the monthly payments that is probably a good option. When they say what they intend, I suggest you specifically ask them if this means that no arrears will show on your record.
Nigel says
They can see arrears but I can’t pay it off and it doesn’t show them my old ones because of payment hoilday so on their internal system it just shows payment hoilday and old ones altogether so they can’t just tell me old ones
Yes rewrite loans so it’s longer
If I pay off my old arrears I assume it would just show no arrears anymore on credit file, but the old ones would still stay if someone checks
Then again if they rewrite the loan won’t the arrears that I’m about to pay disapper
Sara (Debt Camel) says
If I pay off my old arrears I assume it would just show no arrears anymore on credit file, but the old ones would still stay if someone checks
That may well be the case.
Then again if they rewrite the loan won’t the arrears that I’m about to pay disapper
My guess is that would only happen if they deleted the old record and substituted a new one. I am guessing but that sounds to me to be unlikely.
How large are the previous arrears and can you afford to pay them off?
You don’t have a default showing at the moment on your credit record?
Do you have other problem debts as well?
Can you afford to resume the normal repayments?
Nigel says
No defaults
700 pounds arrears and yes I can afford to pay them.
Yes I can afford to normal payments to resume
I only have a few other debts they will be cleared end of the year.
Even if they rewrite the loan, assuming the arrears stay, paying them back would look better then not paying them and just making monthly payments I assume?
Sara (Debt Camel) says
Yes paying off the arrears will make your record look better to other potential lenders, although it won’t change the the credit score that is calculated.
Nicoleta says
Hello,
My husband and I want to apply for mortgage as self employed. The tax for year 18/19 we didn’t paid yet, will this affect us on the mortgage application? We should pay it off?
Thank you!
Sara (Debt Camel) says
Can you afford to pay it? How many years accounts do you have and what % deposit?
Nicoleta says
We had invest some money abroad and we intended to pay it after we take the mortgage. We want to use the Help to buy scheme, and to pay it will take us few months extra.
My husband has 2 years of account 18/19 qnd 19/20, I been employed on 18/19 qnd 19/20 I have employment and self employed as well.
Sara (Debt Camel) says
But this tax is overdue, is it not? What does your accountant say? Unless you have a time to pay arrangement in place with HMRC, I think you should pay it now unless your accountant says differently.
Will your husband’s 19/20 accounts not show the tax is due and has not been paid?
Nicoleta says
Yes is overdue, he doesn’t have an payment arrangement. He doesn’t have an accountant.
If we don’t pay the taxes and we apply for mortgage, will a lender approve the mortgage?
Sara (Debt Camel) says
I’m sorry but you need to get his taxes sorted out asap. That is your top priority, not buying a house. HMRC can and does make people bankrupt if they don’t pay tax.
Nigel says
I had a 6 month payment hoilday with nationwide
Now they offered to rewrite a new loan and old one will show as settled or continue with new one
They said settled shows on credit file as if it’s paid of then show new one, does settled look bad
My total areas is 2000, because 709 before and rest during payment hoilday not on credit file but with them,should I pay that off and continue with normal one
Or
Rewrite the loan and use that extra money to pay of other debts?
Thanks
Sara (Debt Camel) says
Can you afford to pay off the arrears?
What other debt do you have?
Nigel says
I could afford 1200
Aa credit card 1500 left
That’s it and one more debt but over 6 years and not on credit file about 1700, which is with a university as I didn’t finish, gona pay them back as it shows on my bank stament
Sara (Debt Camel) says
So your main interest is what will look best when you apply for a mortgage?
This is hard to say as mortgage lenders may view things differently.
But in general as I said before when you asked this, my guess is that paying off the arrears will make your record look better to other potential lenders, although it won’t change the the credit score that is calculated.
The payment holiday hasnt harmed your credit score. But lenders can still see that it has happened if they look closely, see https://debtcamel.co.uk/coronavirus-credit-score/. So my guess is that paying them back promptly is probably the best thing as it doesnt sound as though you are going to have any difficulty paying your other debts?
Nigel says
Yes exactly my main interest what would look better on moragte
So tell them not to rewrite it?
When a debt is rewritten, the arrears disappear,
I won’t have problems paying other debts but will pay them slowley
Forget to mention also have likely loans 1000
Sara (Debt Camel) says
Likely loans are a bad credit lender. What is your credit record like at the moment? Why have you had to borrow from them?
Nigel says
At the momment it’s 583 poor, no ccjs no defaults missed payments on it though.
I borrowed from likely loans in the past cos a friend manipulated me to lend them money
Sara (Debt Camel) says
So it sounds as though you have no realistic chance of a mortgage in the next couple of years, right? In which case the offer to rewrite the loan and use the cash to immediately clear off your most expensive debt may be best.
BUT if you think you may just spend some if the money then all thus does is to increase your debts which pushes a mortgage away further into the future. If you don’t Think you are disciplined enough to clear debt right now, then I suggest you tell Nationwide you want to repay the arrears now and not have your loan rewritten.
Mia says
Hi me and my partner have 100,000 for a deposit however we are 25,000 in debt would we get approved on a 200,000 house?
Sara (Debt Camel) says
No idea, it depends on how affordable the mortgage will be and your credit history. Why do you have so much debt – any missed payments or defaults, are you using an overdraft? What are your combined Incones? Have you just inherited this money?
Nigel says
Forgot to add 10% deposit is coming from my mum, so will have that separate she refused to use that to pay my debts which is understandably
Sara (Debt Camel) says
true, but it will delay being able to apply for a mortgage AND some lenders are currently insisting that first time borrowers have to have saved some of the deposit themselves.
Gail Straker says
I own (with a mortgage) my home and am looking to get into property investment with a buy-to-let mortgage.
My own house required renovations (owned it for around 6 years) I took out a loan (3%) to finance this. I’m quite comfortbale I can affoard the loan repayments, debt repayments, my own mortgage and buy to let mortgage at the house prices I’m looking at – but how will this be looked at by a lender? My opinion of my payments is not the important thing here!
I have no overdrafts, have paid off my student loan in full, BUT have a 0% credit card at just under £7K – no further spending on this in the past year – will be at 0 by time 0% finance is over in 18m! No life changing plans, no babys, no change of job… No missed payments, no bankrupcy, credit score ‘good’.
I feel like right now is a good time to invest and am concerned that it will take several years to pay off the loan, while I could have enough for a small deposit (15-20%) on a cheap and rentable property ( i’ve done my sums on affordability using property hub for guidance) within the next year.
It might not be everyone’s cup-of-tea to invest this way – I know many will be far more cautious and suggest just waiting out the few years. I’m still very curious to know if its do-able. Looking at the property cycle I don’t think in 5 years time it will be a good time to invest, so… opinions?
Sara (Debt Camel) says
I can’t comment on whether this is a good time to invest in a BTL. With only a 15-20% deposit you may find it difficult to get a BTL mortgage irrespective of your debt situation. I think you need to talk to a good broker.
Leighanne says
hi wonder if you could help, i have a Defaulted account with has been payed off, i currently have 2 morgage in principles at 20% however, i have a morgage broker looking into possible mortgages, my credit score has plummeted because exprian has decided to put the default onto my account, will i still get these mortgages now exprian has done this, i am at my wits end because i am now scared im going to get these mortgages rejected, now im back into the poor band and possibly loose the house i have put an offer in for please help any information would be fantastic, im at ny wits end and so scared thanks in advance 😀
Sara (Debt Camel) says
Sorry what is the debt Experian has added a default to? Why?
Leighanne says
it was a phone bill i Defaulted on in 2015, whilst trying to get a mortgage, they kept withdrawing the 15% offers they gave me, the morgage broker thought i had a fraudulent account in my Maiden name, i contacted exprian, who then told me i had a Defaulted acount. Its only recently been added to my exprian acount and my credit score has gone down to poor, im just worried they are now going to withdraw the 20% offers, now my score is at poor
Sara (Debt Camel) says
So it’s not clear from that if you have a reason to object to the default. Or what these 15% offers were?
Nigel says
Full breakdown of my debt
FYI my credit score is poor however I have no ccjs defaults, but do have about 8 missed payments for nationwide 4 for each loan
Nationwide – 2 personal loans 3863 3919
let them rewrite the loan and just pay 200 or less a month and soon my brother could pay again and get arrears transfers and use money to clear other debts, however old debt would show as settled.
As I already have arrears I don’t think settled or rewritten would make a huge diffence or would it?
Showing as settled is that the same as showing as full and final settlement on credit file
Aa credit card 1500 I pay 50 a month
Likely loans 1129
Pay the full amount this month early payment so will be about 900
1700 to university not on credit file, this needs to be paid back in full so it doesn’t show on bank staments paying 10 a month.
Will make them a offer of 1k end of year for full and final settlement
700 – overpaid tax credits – jobcentre pay 20 a month will make extra
10000 university student debt that will never get paid off u less I get a huge pay rise.
This month I’m gona get overtime pay too so should have over a 1000 spare for debts
Next month I get 946, after 500 on shares at work (which I have about 5000 now locked for 3 years, 100 on pension)
After my expenses(which include Monthley payments to debt) I have about 400-500spare a month for debt
Nigel says
I’m gona do nationwide settled, rewrite loan, because I already have arrears
is settled same as full and final on credit file even though they’re will rewrite?
use extra money to pay off likely loans and rests my credit card
Then start chipping away at the other debts
the. At least the only one I will have to worry about is nationwide, soon as all other are cleared will chip away at nationwide, and any money back from my brother or friend will use towards nationwideany extra after cleared will save
on a side note In just over 2 years I will have a lump sum of about 20k saved up from my shares at work.
Also I’m still open to chaining my mind and paying nationwide about 700 and pay rest of arrears slowley?, (4 months rest arrears should clear)is that better then rewrite and I won’t miss any more payments and still counting Monthley payments
Nigel says
I know I’ve put a lot on there, please can you respond when you get a chance as nationwide will call me tommrow thanks
Sara (Debt Camel) says
It all looks pretty marginal to me as I said before. I would have a mild preference for not rewriting the loan but immediately clearing the missed payments. But no one can really say now what some mortgage lender may think about any of the options .
Nigel says
Brilliant thanks for the reply
Tim says
Hi Sara, wondering if you could help..
I am looking to get on the property ladder but I am worried about my past borrowing history. 2/3 years ago I continuously used pay day loans which have since all been repaid, never any defaults or ccjs etc. This was a revolving cycle for a good few years. I also had a very small new look card which I missed multiple payments on, wer’e talking 4/5 pound payments – silly really.
This year I’ve used your tips above, my last missed payment was 14 months ago, my overdraft is cleared and so is my credit card. I still have car finance of £2.4k/113pm and one loan of £3k both of which I haven’t missed a payment. I’m on £50k per year and credit score 805 Experian. (Fair)
I have managed to save enough for 10% of property value but do you think it would be likely with above in consideration or better to pay remaining credit off first?
Sara (Debt Camel) says
There are very few 10% mortgages at the moment and you may well need an excellent credit history to get one. Carrying on repaying the debts for a while until the mortgage market improves and your problems are further in the past may be your best option. But it may be worth talking to a broker now.
Leana says
My partner and I have found a property and are planning to make a mortgage application using the HTB scheme. Our advisor has asked for 3 months bank statements from us both. We both have steady incomes and our net annual income is just under £100,000 – so we meet all affordability criteria. However, last month I had some trouble with my finances and was in my overdraft for the majority of the month. I was able to clear this debt at the end of the month but had about 2 weeks of being in the red at £1,000.
With me having to send 3 months bank statements (including last month), will our mortgage application be penalised for having gone into my overdraft last month? How much will this impact our chances of being approved?
Sara (Debt Camel) says
It’s hard for me to guess. This is what your advisor is for!
Ann says
Hi Sara
My partner and I are planning on moving. We have equity in the house so 20% deposit and 25k debt for home renovations which will be covered by the equity from selling the house too. Will banks look favourably at the 25k being paid by the equity and write this into the offer or are we stuck in a catch 22 where we need the equity to pay the debt? With the current debt and new mortgage our dti looks like 43% but if we pay the debt our dti would be 20% on the new mortgage and is within our affordability
Sara (Debt Camel) says
I think you need to talk to a good mortgage broker.
Lukas says
Hi Sara,
Hoping you can help with a few questions I have.
My partner and I are looking at applying for our first mortgage in March.
I currently have one credit card with a limit of £2,500, and a balance of £1,200 which will be paid off in December. I have another card with £1,500 limit which has a £0.00 balance (paid off in November). Should I close/cancel one or both of these cards before I apply for a mortgage? I’ve read conflicting advice on this.
Also, I have an arranged overdraft of £1,250 which I am “in” about half of the month. I am due some inheritance which I was going to pay this off, however as there are delays with this am I best of paying this off now with savings I was allocating for solicitors fees etc?
Finally, I have a small loan balance for my mobile phone handset (£150 remaining) – as above, is it best for me to pay this off?
Not sure if relevant, but my credit scores are excellent (Experian and Equifax) and fair (TransUnion).
Sara (Debt Camel) says
there areno absolute rules here. For what its worth, here is what I would do:
Those are small credit card limits, unless you have other cards as well, I wouldn’t bother to close those two.
Yes I would get out of the overdraft now.
That mobile balance is small, I would just leave the monthly payments to continue.
Lukas says
Thank you so much Sara.
JP says
Hi,
Me and my partner are looking at applying for a mortgage in the coming weeks but I’m slightly concerned. We are planning to use H2B and have a joint income of around £75k (about 2/3rd being my income). I used to have a poor credit history (never defaulted or anything but had a high level of debt for a young age), and my credit score has recently increased as I decided to pay off credit cards and loans etc. Using H2B we will need a mortgage of about £320k, will it be an issue for the bank if my credit score has increased quite significantly (gone from poor to middle of good for Equifax/Experian/Clearscore) in the last 2 years, or will they look favourably on the fact my situation has clearly got better and my income has increased somewhat over time? We have both been in our employments for quite some time so there is no issue around job security.
Thanks
Sara (Debt Camel) says
why is it now only at the middle of good? what is wrong with it?
JP says
As I recently moved, the electoral roll should be added in the coming weeks so that should increase it (it’s taking a while to reach my credit reports). Also I’m currently about £1k in a £2k overdraft, which is silly I know as I have £1k in savings that I could pay it off, but I’m hoping that the bank (when asked to see my bank statements) will see that the overdraft/large expenses in recent months were just paying off the last of my debts. As of this month we are able to put £2k aside per month to deposit saving.
I do also have 2 credit cars of £2k limit between them, which have recently gone from high utilisation to low due to me being able to pay them off recently.
Sara (Debt Camel) says
In most councils Electoral roll is updated once a month but not in October or November.
Why haven’t you cleared the overdraft? Just do it.
But I doubt a lender will mind that it looks as though you have been paying off debts fast …. after all that is good! You are borrowing a lot for your salary, so it will come down what the lender’s affordability calculations say.
Andrea says
Hi Sara.
I am single mum of three ,with credit score 470 (clear score) and annual income £26000.Short term debt about £ 3000 and long term debt about £11000 .All payments are on time .
Do I have chance to get mortgage?
Many Thanks
Andrea
Sara (Debt Camel) says
Do you have a deposit saved? what would a suitable house cost in your area?
Andrea says
It’s new build £145 000 property,I am interested.I have £8000 deposit.
Thanks
Andrea
Sara (Debt Camel) says
so this would be a help to buy?
It sounds like a stretch to me, with 3 children. But that is a pretty specialist mortgage market – you need to talk to a broker who deals with it.
Andrea says
Thank you,I will try speak with broker.
Kathryn says
Hi Sara,
My husband and I are FTB. My credit score is excellent, no default, no debt. My husbands is very poor. Previous CCJ for £3k in January 2019 for unpaid mobile phone bill. I was fuming and we paid it off soon as I found out in October 2019. He has no other debt. We put monthly spending on his credit card and clearing it to help with credit rate. We have a deposit of £30k. Joint income of £63k. I’m hoping we can get more in our LISA if we keep saving until April. Aiming for 15-20% deposit depending on the house.
What’s the chance of us getting a mortgage next year? Would we be better off waiting until January 2021 when the CCJ is 3 years old?
Thanks
Sara (Debt Camel) says
The mortgage market for all FTBs is difficult at the moment, if you can get your deposit up to 20% that may help.
You can talk to a broker now, but it may be better to wait and see what the mortgage market is like in a year.
I do NOT recommend getting a “bad credit” mortgage. A bad credit broker will say “it’s only for a couple of years, then you can remortgage to a normal rate” – but there is NO guarantee that you can remortgage. After the 2008 crash, many people were stuck on high interest bad credit mortgages for years.
Kathryn says
Thanks Sara
Will keep saving a bit more. Hoping house prices will crash too
Duane says
Hi I am a home homeowner looking to move I currently have around £25k credit card an loan debt i never miss payments ect if I sell my home il will have enough equity 15% for my deposit for my new home aswel as the £25k to pay all my debts off will I need to pay off my debts first before I apply for a new mortgage or can I still apply for one with the understanding il pay the debt once sold as I’m still I’m my current mortgage deal and would be porting my current rate witch is 3.44%
Sara (Debt Camel) says
So you don’t need to borrow any more money, you are just porting your current mortgage?
Duane says
Hi
I will need to borrow another £50k on top of my current mortgage as the home I want to buy is valued higher then my current home
Sara (Debt Camel) says
So this isn’t a simple mortgage port. It is a new mortgage. You need to talk to a broker about your chance of being able to do this. If they say No, then you need to blitz that credit card debt down for 6-12 months.
If this feels unreasonable, think of it from the lender’s point of view. While you were on a lower mortgage you have run up huge debts. What is the chance of you being able to manage a higher mortgage without again getting into problems.
Sam ob says
Hi, i currently have around £6k in savings and im wanting to buy a small flat something around 75k, my credit rating is fair at the moment, i did have 4 defaults 3 dropped off in december after the 6 years and the last one is due to drop off in a few weeks, so im hoping my credit score will go up. I have zero debt i do have 3 credit cards all with zero balance but a available linit of £3500 on them.
My question is if i was to take out a £4000 loan now, would that affect my chances of getting a mortgage, im not looking to buy until june time, i just want to have over 10k for when i do go in for a mortgage so i have some left over cash to furnish it and to top the deposit up to the 8k/10%
Are the chances of me getting accepted worse if i have the outstanding loan?
Thank you
Sara (Debt Camel) says
All the defaults were repaid?
At the moment it is VERY hard to get a mortgage with a 10% deposit. you also have to plan for buying cost eg solicitors and surveyors fees.
Your chances of acceptance with a loan are worse:
– With a loan, basically the monthly repayments are just deducted from your salary and the lender will consider the affordability on the lower amount. – The lender will also be able to see what you have done as they normally ask for 6 months bank statements and will see the loan there. Some may well refuse just because of this, even if the mortgage is affordable when you have the loan.
Sam o says
Yes all the defaults were paid in full, and are dropping off after the 6 years now.
I thought that 10% mortgages were on the rise now, the monthly payment for the loan would be around £125 which isnt a massive amount and would still leave me enough.
I just didnt know what getting the loan would do to my chances, i think it will be over 6 months away so wouldnt be on statements shown, but it will of course be on my credit file for them to see