Mortgages are normally a “good” sort of debt. Not only do you have somewhere to live, and avoid the costs and uncertainty of renting, but you can be buying a valuable asset.
But even though mortgages are a sensible way to borrow, and mortgage rates are at record lows in 2018, they can still have problems. And these can be made worse in Britain because of the high property prices.
Getting a mortgage if you haven’t had big debt problems
How high should my credit score be? The actual number doesn’t matter much! But what your credit record shows about how you have managed credit is very important. See How fast can I improve my credit score to get a mortgage? which looks at different situations.
95% mortgages – In 2020 after the pandemic there are no standard 95% mortgages on offer. Your only chance is a Help To Buy mortgage. These have some BIG drawbacks. not only are the new build houses often cramped and not very well built, but all new houses lose a lot of their value in the first year. If house prices do not do very well over the next 5 years you may be left with large negative equity and be unable to move to anyway larger or in a different area. And at the end of 5 years it may be very difficult to remortgage at a good rate.
Should I opt for a very long term mortgage? This keeps your monthly payments low. But these mortgages can run into problems, it may sound easy and flexible now but read Is a long – 35 or 40 year – mortgage a good idea? to see if one is right for you.
My debts are all fine but are they too high? Debt repayments take up some of your income so it affects the lenders’ affordability calculations. See I have debts – can I get a mortgage? which also has a link to a good affordability calculator. It doesn’t matter if you think the mortgage is affordable, what matters is what a mortgage lender will think.
Will using Credit Ladder help me get a mortgage? It may sound obvious that if you have paid £900 in rent on time for the last few years then you can pay a mortgage of £900, but in 2020 most mortgage lenders do not seem to take any account of rental payments on your credit record. See Should paying your rent on time help you to get a mortgage?
Should I maximise my deposit or clear some more debt? – There isn’t an easy answer to this question. How to balance clearing debts with saving for a deposit looks at what you should be thinking about.
Getting a mortgage if you have had debt problems
Can mortgage lenders see that I have taken Coronavirus payment deferrals? Yes – see Covid-19 – credit score protection, but will it be harder to get credit? for details. The short version is that unless you have a large deposit and can easily pass the affordability tests it may be better to wait 6 or 12 months until it is clear the recent problems are well in the past and are not going to happen again.
I’ve had very recent defaults but paid them off – This may still be a problem, see Will recent defaults stop me getting a mortgage? which answered a reader’s question who had inherited some money.
Am I OK as my debt problems no longer show on my credit record? – Sometimes this is fine, but lenders ask to see your bank statements and have other sources of information. See Can mortgage lenders see debts that aren’t on your credit record? for details
I’m in a DMP – Debt management can go on for a long time and can be shown on your credit file in various ways, so there isn’t a simple answer to this question, but it will normally be very difficult. See Mortgages and debt management.
I’ve had payday loans – In 2020 most lenders will not give you a mortgage if you have had a payday loan in the last two years. See Payday loans make it harder to get a mortgage for details.
I’ve completed my IVA/bankruptcy/DRO – Although bankruptcy, IVAs and DROs all wreck your credit record for six years, you can recover from this if you can get a good deposit together. See Can you ever get a mortgage if you have been insolvent?
I’m in a DMP, can I use Right To Buy? – There is a clause in the Right To Buy rules which says you can’t have an arrangement with your creditors – but this means IVAs not a DMP or payment arrangements, see “Right to Buy” and debts.
When you already have a mortgage
Fixed rate ending? Should your remortgage? More than a million people could save a few hundred or even a thousand pounds a year by getting a new fixed rate. Find out what your 4 options are at the end of a fixed rate and how to decide which is right for you.
Help to Buy mortgages now reaching the crucial 5 year point The government Help To Buy scheme started in 2013, so the first users are now getting to the five year mark when the government starts to charge interest on its 20% share. Should you try to remortgage?
Options if you have an interest-only mortgage At the end of an interest-only mortgage you have to repay the full amount, but nearly a million people in Britain don’t have a plan for how they can afford to do this. Many are hoping they can remortgage, or be allowed to carry on making their usual monthly payments, but this isn’t likely. If you are one of these people, find out what your real options are.
Refused a mortgage – is this reasonable? There are millions of “mortgage prisoners” in Britain, who are stuck in their current mortgage because they don’t meet the new affordability rules that were introduced in 2014. Sometimes the lenders are applying these too strictly though and can be challenged.
Financial problems when you have a mortgage
For remortgage/equity release and secured loan problems if you are in an IVA, look at the Guide to IVAs.
SMI – should you accept the new loan? Support for Mortgage Interest is the name given to the help you can get from the benefits system with your mortgage costs if you retired, unemployed or too ill to work. In April 2018 this stopped being paid as a benefit and started to be given as a secured loan. But if you are out of work it’s still worth finding out about though!
Charging Orders and Orders for Sale If you have a house with equity and you are having problems with your unsecured debts, you may be worried about your creditors getting a charge on your house or even make you sell it. Find out the facts about this area.
Sell the house – a tough decision One of the main aims of debt advice is to let people stay in their own home – but this isn’t always the best decision, so have a think about whether it is right for you.
Repossessions
Repossession after bankruptcy Sometimes when everything has gone wrong and you have a house with negative equity you want a completely clean start after going bankrupt. Find out how to hand back the keys after bankruptcy and make sure your mortgage debt is included in your bankruptcy.
How repossession will affect your credit record Most of the problems that occur here when a lender doesn’t add the correct default date.
Will very low mortgage repossession rates continue? Three reasons why they may be going to increase from 2016.