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Bad Credit Joint Mortgage

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  • Bad Credit Joint Mortgage

    Hello all,

    My fiancee and I would like to get a joint mortgage sometime next year. She has an good/excellent credit rating, whereas I do not; I have a couple of defaults on my credit report plus some late payments. The defaults will hopefully clear in December 2012, but we'd rather not wait that long.

    I will be a fully qualified social worker this year, hopefully with a job! Starting wage £25,000. My fiancee will be on £21,000.

    We're looking to borrow around 144,000 with a deposit of 16,000.

    Questions are, can we get a joint mortgage? If so how? Any advance would be much appreciated.

    Many thanks for reading!


    Rob

  • #2
    Re: Bad Credit Joint Mortgage

    Hi Rob,

    Your joint wages should be sufficient to raise a mortgage of that amount from most lenders, but neither of you have a wage that is high enough to secure a mortgage of £144,000 solely.

    So your only option (other than finding a guarantor, a larger deposit, a lower purchase price etc) is a joint application, but this may well be awkward because of your credit history.

    It's very difficult to predict what the lending situation will be next year and how that might have changed from where we are today but most people think that the availability of mortgage finance to those with a poor credit history will not improve greatly in the short term, particularly for those with 10% deposit such as yourself.

    Therefore the best advice is for you to try and repair your credit history as soon as possible. This may mean paying off your defaults as soon as possible and clearing them from your file early, and then ensuring that payments are kept up to date religiously from here on.

    That will give you the best chance of being accepted next year, but still cannot guarantee that a lender will help, or if so, what rate of interest you will have to pay. The sooner your credit file is cleaned up, the sooner you'll have a chance to borrow, but you may have to wait longer than 12 months.

    Best of luck.
    ____________________________________________
    Property for sale in Torquay

    www.thomasdobner.co.uk

    Comment


    • #3
      Re: Bad Credit Joint Mortgage

      Hello,

      Thanks for much taking the time to read our message and for your advice.

      I've looked into getting rid of the defaults, but this does not seem to be an option, as even if I did pay the defaulted amount, the default will still be there on my file.

      I've heard of people going through mortgage brokers. Would that be of any use to us? How do they work exactly? How does the guarantor work?

      Any advice would be much appreciated!

      Rob

      Comment


      • #4
        Re: Bad Credit Joint Mortgage

        Hi Rob,

        You're right that the defaults will stay on your file for a period of time, but the same will be true if you wait for them to expire in December 2012. If you paid them off now you would reach the point at which they can be ignored for lending purposes 18 months quicker. Also, lenders are much more agreeable to help somebody who has been responsible enough to repay their bad debts in full rather than those who have simply let their bad debts run their course and have "got away with not paying them".

        For example, a lot of lenders will ignore defaults and / or CCJ's that are more than 3 years old (from the date of expiry, not registration). So waiting for them to run their course could mean being turned away from lenders until Dec 2015. Paying them off now could mean getting accepted much sooner. Also, some lenders stipulate that they will only ignore defaultes after 3 years if those debts have been repaid in full and not left to expire.

        The difficulty is that not all lenders are the same, and the criteria is changing frequently. At the moment there are lenders that ignore defaults 12 months after satisfaction, but they may also have other stipulations such as maximum values and maximum volumes for those debts (i.e. something like "maximum 2 defaults up to a total of £500 ignored after 12 months").

        The other problem is that whatever is true with lending criteria today may not be true next year, or even tomorrow, so basing your forward planning for next year's borrowing on this year's criteria may be inappropriate.

        Paying off your defaults now will give you the maximum likelihood of getting a mortgage in the shortest time possible, at the best rate available and with the lowest amount of deposit. Leaving the defaults to run their course could compromise this by requiring you to either wait longer, find more deposit, or pay a higher rate of interest.

        But all of this is hypothetical, because we are talking about next year, and not now, and the answer may be different (either in your favour, or to your detriment, we simply don't know) in 12 months time.

        Either way, definitely find a broker to work with. Ask friends / family / colleagues for a recommendation and maybe have a chat with them now about their opinion on the best course of action over the next 12 months to improve your chances.
        Last edited by IFA; 13-05-2011, 07:36 PM.
        ____________________________________________
        Property for sale in Torquay

        www.thomasdobner.co.uk

        Comment


        • #5
          Re: Bad Credit Joint Mortgage

          Hello again,

          I should explain that the defaults are on my file as Dec 2006. It was a Lloyds student overdraft I didn't pay back. I realise this was irresponsible, but there it is, I'm not that young fool any more! It was then passed on to a debt collection agency that put a default on for Jan 2006. By the time the debt agency found me the debt was 'statute barred' meaning I did not have to pay it back. So to summarise, I have a 'Default' followed by a 'Settled' on my Lloyds history and a 'Default' on the debt collection agency history.

          My understanding is that these will both disappear off my record in Dec 2012 because it would be 6 years old. So I'm not sure that they will be on my record until 2015.

          Thanks so much for your support. We'll probably talk to a broker as you suggest. If you have anything more to say on the above, then please do!

          Many thanks,

          Rob

          Comment


          • #6
            Re: Bad Credit Joint Mortgage

            Hi Rob,

            That puts a slightly different spin on things. It sounds as if your Lloyds default was satisfied more than 3 years ago, and would therfore probably be ignored for lending purposes with a number of lenders.

            However, it sounds as if it was satisfied because it was transfered to debt collection, and this may then still count as an active unsatisfied default if it is still showing as such on your credit file. If so, it will probably continue to cause you difficulties for some time to come.

            You really need to take a full copy of your credit file to a mortgage broker or some other debt counselling expert such as Citizen's Advice Bureau to discuss the implications of this and any possible actions you might need to take.

            Good luck.
            ____________________________________________
            Property for sale in Torquay

            www.thomasdobner.co.uk

            Comment


            • #7
              Re: Bad Credit Joint Mortgage

              IFA, I feel like buying you a beer, you've been fantastic! Thank you so much for your advice. I'll go to citizen's advice and go from there.

              Best wishes,

              Rob

              Comment


              • #8
                Re: Bad Credit Joint Mortgage

                I was wondering in such a case if you obtain a mortgage, would it affect the credit score of the other applicant i .e. the one with the good score and get it down because its a joint application with a person having a bad score? Any idea?

                Comment


                • #9
                  Re: Bad Credit Joint Mortgage

                  It is in such situations that the agreement signed at the onset of the mortgage becomes crucial and you will have to refer to it. Since you took the mortgage as a joint arrangement, it must have been reflected in the agreement alongside accompanying terms and conditions of the joint mortgage. In most cases, the agreement should specify that the joint holders of the mortgage are fully responsible for all repayments until the total sum of the mortgage is totally cleared.

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