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What are our chances of getting a mortgage?

(20 Posts)
Turquoisetamborine Fri 21-Nov-14 13:56:41

These are our circumstances. We have a joint income of around £3600pm take home. Both of us work and have one child, due another one in May.

We had to leave our old house due to extreme problems with next door neighbour. We have a mortgage on it for £85k and it's worth probably £70k (bought at height of the market). It's a two bed terrace and has little chance of increasing in value any time soon so we overpay the mortgage by £200pm. Overall we are paying £300 off the capital a month. Mortgage company are aware we moved out and gave us consent to let which we paid a fee for. We have long term tenants which covers £459 of the £650 we pay for the mortgage a month inc the overpayment.

We live in a lovely three bed house which my dad owns. He is 61 now and would like us to buy it off him. He owns about 20 buy to let properties and wants to sell most of them off and retire. We love this house and don't want to let it go. He would never sell it to someone else but we need this matter wound up.

We have a credit card on 0% interest with a balance of about £2500 which we used for IVF. We pay £600 a month at least off this now we've finished paying for our very expensive treatment and are chucking as much money as possible at it.

We have two cars which are paid off and nothing on finance. Just usual bills which I can list if it makes a difference.

Dad has a mortgage for £50k on the house we live in, it's worth around £135k and he would like £100k for it. We have no deposit as we have been paying as much off the mortgage, credit card and ivf as possible. He mentioned a gifted deposit as he doesn't want us to pay the full value of the house. Would this be possible?

I know of a good mortgage broker but she charges £300 for the initial consultation which I don't want to pay til we know we have a chance.

Any ideas?

Bearbehind Fri 21-Nov-14 14:58:52

Have you entered all your details into a few of the mainstream lenders mortgage affordability calculators? They give a pretty good estimate of what is achievable and allow you to factor in debts and your rental property.

Your forthcoming maternity leave and an additional dependent isn't going to help your chances - how much of your joint income does your DP earn?

If your father is gifting you the deposit by letting you pay £100k for the house then he will need to sell it to you for £135k otherwise there will be no equity in it.

The mortgage valuation survey would then need to agree it is actually worth £135k. Selling at this price means you'll pay stamp duty on it.

Turquoisetamborine Fri 21-Nov-14 16:24:00

Thanks Bear I've just looked a few of the affordability calculators and it looks like we have enough income. It's just whether they would allow us to treat the reduction as a gifted deposit.

I know my maternity leave won't help but I get full pay for 6 months of it and then will only have the additional three months on SMP off. We would have ideally applied before I got pregnant but we had so much to pay for with the IVF, it's cost us £8000 even with family help so thought we would be even less likely to get approved with all that going out.

My H is the main wage earner. He earns £2200 of that take home amount and can be more depending on commission.

carrie456 Fri 21-Nov-14 16:28:54

Of course you will be able to on that kind of income. My friend did this recently and is in negative equity on one place but got a mortgage of 135k on another. They only earn 35k between them and have more children than you. They went through the halifax

Turquoisetamborine Fri 21-Nov-14 16:32:20

That's helpful Carrie. Does your friend rent their other place out?

Cheerfulcharlie Fri 21-Nov-14 16:35:54

I disagree with the previous poster who said your Dad has to sell it to you for 135k. The mortgage company will do a valuation on it and this should be in line with market value, not what you actually paid. If they do value it at £135k then you will have £35k in it. The only problem is that if the Valuer sees you are buying it for a low price they could be very cautious in their value and err on the low side. However if you have lots of comparable evidence to show them (recent, similar sales) then you can also ask them to consider these if they do give a lower value than £135k.

carrie456 Fri 21-Nov-14 16:37:03

Yeah they bought in 2006 for 106k but its valued at 85k now they tried to sell but couldnt so now they rent out and got a mortgage on a 155k place with a 22k deposit. They did take it over a longer term than 25 years though but Im not sure how many.

Cheerfulcharlie Fri 21-Nov-14 16:41:46

The negative equity in your buy to let is a problem though. Your new lender will need to see about 20-30% equity in the rental property and usually see that the rental income is 125% or thereabouts of the mortgage payment. It depends on your new mortgage lender whether they will look at your income and decide if this covers the rental property sufficiently but you may need to get rid of that property first - and therefore find the £15k negative equity from somewhere.

Viviennemary Fri 21-Nov-14 16:48:07

Could you not get round it by putting one house in one name and your new house in your name or even vice versa. It might depend on your credit rating.

Bearbehind Fri 21-Nov-14 16:50:09

cheerful I meant he would need to sell it at £135k as opposed to £100k- I did say they would need to get a mortgage valuation on it hmm

They can't 'buy it for a low price' in the situation the OP describes- they need to buy it for market value and hope whatever that is over £100k is an acceptable deposit.

It's not possible to say 'of course you will be able to on that kind of income'.

The situation you described carrie is different because they had a substantial cash deposit. Mortgage lending is all about being seen to be responsible- if the OP has debts and hasn't been able to save anything towards a new deposit it doesn't matter how high their income is- they are currently living beyond their means and it will potentially result in a mortgage application decline.

Not all lenders will be comfortable with a gifted deposit even before debt, maternity etc are accounted for.

have a look at a few affordability calculators and take it from there. If they are giving you figures way above what you need then you might be safe without a broker- if the figures are borderline it would be worth finding a good broker who could advise a lender who'd be happy with a gifted deposit etc

Bearbehind Fri 21-Nov-14 16:53:33

Sorry - brain fog- I'd read you'd looked at the calculators then ignored it!

We're the results well over what you need? Did you disclose all your debts, dependants and costs on the rental property?

Turquoisetamborine Fri 21-Nov-14 17:18:54

The calculators didn't ask about the rental property but I did put the debt into it and it came up that we could borrow between £140 and £180k depending on the lender.

The other option is my dad actually could give us £25k to put down as a deposit then we would pay him back when the mortgage went through.

Vivienne, that may be an option. I suppose the broker would advise on that. We just need to bite the bullet and book an appointment with her.

We could save a deposit but that would mean that the £900 a month we are paying off the negative equity and debt would not be getting paid so it's difficult to know which is more important. My dad isn't desperate for the house sold but I can see that he would like it sorted.

Bearbehind Fri 21-Nov-14 17:29:15

Try the nationwide one turquoise it has a specific section about other mortgages.

As someone else said, for the other property to not limit your ability to borrow against another property it needs to meet criteria yours doesn't.

The costs you incur in funding it will reduce your affordability it's just a case of trying to work out by how much.

The £25k cash gift from your dad probably won't work because he'd have to sign to say it is a gift not a loan.

Why would he want that paying back though? He'd actually be better off is he gifted you £25k in cash and sold you the house for £135k and you got a £110k mortgage rather than effectively gifting you £35k buy selling you a house for £100k that he could get £135k for from someone else.

Getting houses in separate names if you are financially linked by your current mortgage is unlikely to be an option as you would need to disclose that you were both going to live in one property (otherwise none of the rental income would be relevant) and were both responsible for your dependants so it would be effectively a joint application anyway.

Turquoisetamborine Fri 21-Nov-14 17:45:30

Thankyou for all your advice Bear. I'm sure he would be fine with giving us the 25k, it was me who wanted to give him it back as he's been so good to us. I can see how the figures would add up better though if we saw it as a gift rather than a loan and could actually use it as a deposit.

What a complicated situation.

Bearbehind Fri 21-Nov-14 17:54:14

It is complicated and I've thought of another option just to make it more so! grin

Would he consider gifting you £15k cash and effectively sell you the house for £20k below market value by gifting that amount too?

That way you could sell your other property and pay of the negative equity with the £15k and still have about a 15% deposit on the new one.

your dad would be in the same position as the original idea but you'd have far less liabilities and therefore be much more likely to get a mortgage.

You could always try and pay him back further down the line if you can afford to.

It sounds like he's happy for you to have the money for now.

nottheOP Fri 21-Nov-14 17:58:25

Try London & country. Fee free and whole of market. It's all down to affordability.

Turquoisetamborine Fri 21-Nov-14 21:57:48

I need to talk to him but I'm sure he's be happy to so that.
Thanks nottheop, I've heard they're good brokers.

bettybyebye Sat 22-Nov-14 07:36:15

Second giving London and country a call - we were in v similar circumstances last year. Had an £80k outstanding mortgage on a property worth £75k (bought in 2007) and needed to relocate and buy a new house where we were moving. I was also on mat leave at the time. Our income was slightly higher (c£4k/month, although I was the higher earner) and we got a mortgage for £166k at 90% ltv over 25 years. Biggest difference, however, was that our first property was not let at the time (as we were still living in it). We were told that you needed to show evidence of 6 months rental income for it to count as income. So I disagree with the poster who said you need to have equity in the rental property in order to get a mortgage on the new property. We also had a 10% cash deposit for the new property. I think it's doable for you, but would speak to a free mortgage broker in the first instance.

evilkitten Sat 22-Nov-14 07:49:30

While most people get a mortgage from a mainstream lender, it doesn't have to be that way. Would it be an option for your dad to give you a mortgage to buy the house? It would help your dad on his goal towards retirement, as you now own the house. While he doesn't get the capital back, he does maintain an income stream through your mortgage repayments.

Once things become clearer with your own house, you've paid off your debts etc., then you could remortgage with a mainstream lender to return the capital to your dad.

Bearbehind Sat 22-Nov-14 08:45:15

betty the rules have got a lot tighter since April this year. You are right, you don't have to have equity in the first property to be able to buy another but you do need to prove you can afford to cover the other mortgage and all other monthly bills as well as the new mortgage which is where the OP may struggle.

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