Any mortgage experts around that could explain something to me please

[Mammasjusttired]

We’re currently in a really rubbish financial situation, neither me or DH have good credit ratings. We currently own our home but are slightly behind on mortgage as well as other bills. We desperately need to move house as well have a small two bedroom and due to DC additional needs we need another bedroom.
obviously getting a mortgage for a bigger house is not an option. However we have seen a shared ownership house near us that we are interested in. Is this something a mortgage company would allow us to do in our situation?
For reference we have approx £80k equity in the house. We bought it for 155 and it is now worth approx £210. New house is 55% ownership for £155

It's highly unlikely any mortgage company would take you on if you're currently in arrears. You can't afford your current £155k mortgage so how would you afford the new mortgage plus the rent on the other 45% of the property?

A mortgage lender won’t touch you if you’re in arrears.

Your current lender may let you port the mortgage, particularly if you clear the arrears. As others have said a new lender is unlikely to take you on. How would you afford the rent on the 45% though?

"We currently own our home but are slightly behind on mortgage as well as other bills"

What does "slightly behind" mean (how much/how many months, and what are you doing about this situation with the lender? Not even considering the other bills right now.

As pp said, no-one (reputable) will lend with arrears, but are you talking 1 month or 11?

I wouldn't touch shared ownership in your situation. I'd also be concerned about adding moving costs to your existing costs.

Any other options- cheaper area? Could you let out your current place and rent somewhere more suitable?

In short, no, don't go shared ownership. Yes, the mortgage will be lower, but you'll be paying even more on renting the other part. I don't think you're going to be in a position to move to somewhere with an extra room as no new lender will go near this situation, and the current lender won't let you borrow more.

I would say you need to talk to a debt counselor like Step Change for advice on your particular situation if you haven't already. You could also consider using the mortgage charter (6 months of interest only payments to give some breathing space).

Would you even be eligible if you already own?

There are lenders out there that will lend with bad credit but with a much higher interest rate, so with rent on top, probably won't be cheaper, even if you could get shared ownership.

@YellowSubmarine994we wouldn’t be borrowing more, the mortgage would surely stay the same as we would need the same amount for the new house as we bought our current house for, although now we have 80k equity.
I didnt think this would be an option just wanted to check. Looks like we’re going to have to sell up and rent somewhere bigger instead unfortunately.

Sorry just realised I misread your post @YellowSubmarine994!

The best thing you can do is speak to an independent mortgage advisor. No one can guess based on your situation. Though on the face of it, it doesn’t sound affordable for you to pay the mortgage you have now, plus additional rent, when you already can’t pay just your mortgage. It sounds like you need some financial advice though to help you get back on your feet.

Looks like we’re going to have to sell up and rent somewhere bigger instead unfortunately.

Even renting will be difficult if your credit ratings aren't great. There's so much competition for rental properties nowadays that landlords can pick & choose who they rent to. I think your best bet is staying put for now, work on clearing your arrears and improving your credit ratings. Is there anything you can do to make your current house work better for your family?

You might struggle to pass credit checks for renting

Not sure I understand. So you would be able to immediately pay £80k and only need to mortgage for 75k?

Even if you were able to change lender (unlikely) the interest rate on shared ownership products is generally higher so stricter affordability checks and as PP say, you have to pay the service charge and rent. As a rule you can't port a standard product to shared ownership.

I wouldn’t recommend shared ownership, it’s fraught with pitfalls & harder to sell if you ever need to move.

When we spoke to a letting agent they said that renting should be fine as once we sell the house we will be in a position where we can pay 6-12 months rent upfront

Really wouldn't recommend shared ownership or moving into rented. I obviously don't know the layout of your home but I would think laterally to see if any room could be divided in two etc to make the space you need.

I’d be really careful trusting that OP- I know where we are rental’s are so competitive that you’d not even get a look in with poor credit, even if you could pay the entire 12 months upfront, there’s so many other options that no landlord even has to take the risk.

OP the rental market is fierce at the moment. A lot of landlords are selling due to reeves tax implications & the forthcoming renters bill.

A landlord would not choose you as tenants over a family who paid bills & previous rent / mortgage on time.

How will you afford the rent? If you get into arrears eventually it’s eviction. Then you are at the mercy of the LA for temp accommodation possibly even out of area. I don’t think you have thought this through longer term.

We currently own our home but are slightly behind on mortgage as well as other bills.

How 'slightly' behind?

Well they would say that. In reality landlords won’t touch you with a barge pole, even if you pay 6-12 months in advance.

And if you go into rented, the chances are you'll never be able to buy again. The equity you've built up so far will be frittered away on rent (which is likely to be more per month than your current mortgage) and you'll end up with nothing. No deposit to buy another property and no chance of saving another deposit as your rent will leave nothing spare at the end of each month. Think long and hard about the long term consequences of this decision.

@Shinyandnew1 one month behind.

Our current layout just really has no option for another bedroom unfortunately. We’ve tried to think of any way we can to do it but it’s not doable

This is our current home

Sofabed in the living room and other dc into the main bedroom? Not fun for you but better than incurring more debt trying to move or renting (which you'll struggle to do).

If I were you I'd make an appointment with an independent financial adviser and see if they can help you find solutions to your financial difficulties.