Mortgages

[Icanflyhigh]

Bear with me on this, might be long and I'm ranty.

DH and I applied for mortgage, jumped through all the usual hoops to be told there is a deal available IF we can increase our deposit to 20%

We currently have just over 5.5% deposit for the property we want to buy. We can't raise another 15% in a month of Sundays.

On paper, it all works. Joint income of almost 70k, but my income comes from 5 different employers and most lenders will only take 2 salaries from one person into account. I also had an IVA which finished successfully in 2021, but again, most lenders want 3 years clear of IVA before committing.

I signed up with credit ladder over 4 years ago and it has recorded every rent payment, on time, in full.

There are no missed payments anywhere and we are in credit on all of our utilities. We don't have credit card debt or loans and have worked hard to save a decent deposit, which we are adding to.

My biggest issue is that the mortgage we would be paying is LESS than our current rent, and we've offered to pay a higher mortgage repayment.

Why is it so damned difficult to buy a house?

Feel so jaded tonight. Had our hearts set on a house we both love and the dream is over.

"there is a deal available IF we can increase our deposit to 20%"

That's more to do with the state of the current housing market than any reflection on you or your budgeting. It basically means the banks think house prices could drop by 20% and they want to be sure they won't lose their investment.

"My income comes from 5 different employers and most lenders will only take 2 salaries from one person into account."

Could you set up a company and invoice your employers, instead of being paid through payroll? You'd then "pay" yourself and would only have one salary to account for?

"The mortgage we would be paying is LESS than our current rent"

Yes, but a mortgage is a commitment over 25 years, rent is just a commitment for whatever the tenancy agreement says. And in the mortgage scenario, there is a risk of negative equity. In a rental scenario, the only risk is that you'll leave the place untidy and lose your deposit. It's the same principle as renting a car for a day (cost per day is high ... paperwork needed at car rental desk is basically a credit card and a license), versus leasing a car for 4 years (cost per day is much lower, but paperwork needed is more involved and includes credit checks etc.)

Final thought - have you thought about asking the seller to drop their price by 15%? In the current market ... they just might?

Because your past history indicates risk.

There is always 'a deal available' and there will be in the future. Given your history, I think I'd wait until next year when you will have three clear years from your IVA and you will have saved a larger deposit.

I don't think house prices will rise (and may well fall) given the economic situation. And when you do buy, the difference between rent payments & mortgage payments will be even larger and more enjoyable, Either way, good luck.

Keep saving, get those 3 years clear of your IVA and your risk profile will be much better

Thank you - I know you're being the voice of reason and I need to hear that right now.

It all feels very unfair even though I know we are in a good position compared to some.

I'm being mardy basically because I can't get my own way.

It won't be the best rate but if you need a mortgage broker then simply adverse are one I can recommend
They got me a mortgage when several other brokers couldn't

I don't think it is particularly unfair, a recent IVA is going to mean you are seen as high risk, and then the current market means it is a high risk lending environment too

Could you set up a company and invoice your employers, instead of being paid through payroll? You'd then "pay" yourself and would only have one salary to account for?

I have seen some ridiculous ideas on MN but that is really daft - this isn't possible, OP it's a batshit idea that would lead to all kinds of legal and tax issues, please don't consider it.

Sorry OP but you can't simply set yourself up as a company and invoice your various employers. There's a big clue - you are an employee, not self employed.

The status "employed" or "self employed " isn't a matter of your choice. It's a matter of fact. Look up on UKGov or take my word for it (33 years working in HMRC)

mark19735

Please don't make suggestions about which you know the total of Fuck All.

Even if you could go self employed, you’d be restarting the clock as you’d need 3 years books to be considered for a mortgage.

I'm not surprised you can't get approved for a mortgage with only a 5% deposit!
Deposits that low have been incredibly rare since about '08, unless it is government backed by a HTB loan or something.

Plus your very recent IVA is obviously not going in your favour.

Save for the next 3 years while waiting for the minimum time post IVA and hopefully you will have a larger deposit.

Having more than one job does not mean you are not an employee, you can be an employee of more than one organisation. As OP is already considered an employee of these five places, then I would assume that this is what she is.

A more realistic suggestion for overcoming the problem of five employments for mortgage purposes, is probably to up her hours in a couple of places and resign from the others.

Well, there we are. Your assumptions are just that. Might be correct - might be wrong. Assuming you can up your hours might be just as flawed. It's for the OP to reflect on all suggestions and decide what best suits their circumstances.

Whether or not a situation is classed as employment is complex, and there are many factors to consider. It's not simply a choice the individual makes, but neither is it a decision the organisation makes either. It is a negotiation, and a judgment call with many consequences to consider. But it is legal, commonplace and has helped many, many people fulfil their career and life ambitions.

Everyone firing off abuse and putdowns based purely on their own experience or assumptions is not being particularly helpful. Might make you feel clever and wise, but that's not what the OP needs (and it doesn't actually make anyone else on these thread think you particularly clever or wise).

There's loads of 5% deposit mortgages but it's the IVA that's the problem

Not true. There were plenty of mortgages like that in 2019 when we were first time buyers.

The problem for you is that both the low deposit and the recent IVA are sticking points, even for specialist lenders.

There are a small handful of lenders who'll look at IVAs more recent than 3 years, but (from a quick search) none of them have product ranges up to 95%.

And any lender who'll do a 95% mortgage right now is very unlikely to do so with a less-than-3-year-old IVA.

I might be wrong (I work in the industry but not as a mortgage adviser) and you could speak to a good broker who specialises in trickier cases to get an idea of whether they know someone who will accept it - some of the smaller lenders really are super flexible if the underwriter can see the credit file as a whole makes sense. I can recommend someone if you DM me - if anyone could place this mortgage, it'd be them.

But really I think your options are:

1. Wait til IVA is 3 years old
2. Look at much cheaper properties to give you a bigger deposit % (although I know this is impossible in some areas)

It is frustrating when you're paying rent which is higher than your mortgage, but it's an overall risk scenario and with a 5% deposit, you're not leaving the bank much room. If you had a higher deposit if you defaulted and they had costs associated with repossession etc they would be covered.

In your place, I wouldn't go down a LTD company or self employed. That will just open up a new can of worms of having to show 2 or 3 years accounts. Is there any way you can get a 1 new job you'll only need 3-6 months pay slips and will be seen much lower risk. Alternatively, go up your hours on 2 jobs as a PP suggested.

Looks like 3 years since your IVA was settled will be next year? Just keep saving and hopefully things will look rosier for you next year.

Having your utilities in credit won't help your credit record. I'd suggest using YNAB for budgeting. Cut back on your payments to utilities (and if you have large balances on them, consider requesting payment from them) just make sure you are putting enough away in the appropriate accounts in YNAB so you know not to spend it, but your bank balances are showing higher amounts.

Unfortunately OP, it's the IVA that's the issue. As you've sort of seen, there's still plenty of 5% deposit deals out there but in the current market, they're pretty tight in terms of lending criteria and will be looking for not only no debts, but a stable reliable income and no blemishes on your credit report.

The challenge is, an IVA is one of the biggest blemishes you can have on your report and it'll show for 6 years from the date it was set up I believe. Now, I don't know how long your IVA was for (5 years is fairly standard), but ultimately you may have struggles until it's dropped off your report. If it's been there for more than 6 years and hasn't dropped off I'd recommend contacting the credit reference agencies to get it removed because to the bank, it's irrelevant how long it's completed for, they simply won't know it existed if it drops off your file which would be a huge win.

In the meantime I do think holding off until the 3 years is up as per what your bank said (or it drops off your file) because prices will reduce over this year anyway so late 2024 or early 2024 is likely to be a good time for those in a position to buy.

I feel for you OP, but as others have said it’ll be the IVA and relatively low deposit that will be flagging. I’d wait until the IVA has fully run its course and continue to save in the mean time.

I wouldn’t consider the self-employed Ltd company route as that’s bonkers and providers would normally want about 3 years worth of accounts, so you’d have an even longer wait. To suggest that when we don’t know what you do is also very misleading. Having multiple jobs doesn’t mean you can be self employed. You could work on the checkouts one day a week across, Tesco, Sainsbury, Asda, Waitrose and Lidl. I’d love to see the look on their faces if you followed a PP advice and told them you’d set up a limited company and would like to be self employed as you have multiple jobs!

Try not to get disheartened and I’m sure you’ll be in your own home soon.

I'm not surprised you can't get approved for a mortgage with only a 5% deposit!
Deposits that low have been incredibly rare since about '08, unless it is government backed by a HTB loan or something.

That's completely untrue. We bought with a 95% LTV in 2016 and there were loads of similar options in the market.

They will have been removed again recently because of interest rate rises and the general state of the economy making lending more risky

Remember that while a mortgage is cheaper than rent, it doesn't include the cost of repairs and maintenance which can be thousands a year.

A 95% mortgage means you will be paying a higher rate of interest, and could go into negative equity if prices fall by 5%. This could mean that you can't remortgage, or would struggle to pay if interest rates go up.

Those things together would suggest that you can't afford the house you're trying to buy, and it might not be a good idea.

Low deposit

Recent IVA

Income for a lot of different employers

You are not a desirable borrower. The best rates always go to low risk borrowers. On paper you are not a low risk borrower.

With interest rates increasing I would take some more time to save a bigger deposit and let that IVA settle. 2021 wasn't that long ago.

Debt Advisor here. It's the IVA. Now that might well have been the best solution at the time, and well done for taking a decision to deal with your debts productively. However, the downside is that such a solution has to be recorded and visible to potential lenders, which you would have been made aware of at the time. It's annoying, but that's the way it goes if you want debts written off.

Therefore, they want a bigger deposit as you are more of a risk factor.

It's not untrue. Of course 5% mortgages exist, I didn't deny that, but lenders are incredibly strict with who then lend to hence 5% mortgages as a product are actually quite rare.
The number of people getting a 5% mortgage is very low.

They are pulled on and off the market like the wind, in the last 3 years lots of banks removed their offering twice; once for the pandemic and again with the rise in interest rates.