Mortgage Questions - Can anyone help?

[WineWithAView]

Current house is mortgage free, but I want to move. I think I'll need around a £50,000 mortgage to add to current house value (around £180k) to make the move worthwhile. And I'd be looking at a 15 year term mortgage as I'm 50 now.

I'll be starting a new job in a few months time. I'll be part-time initially, around £12,500 salary with a UC top up on this. I have a young son with additional needs (hence me only working part-time/school hours at the moment) and he gets DLA, this will be reviewed in 2 years time. I also get Child Benefit for him.

So, first question is:
Do lenders take things like UC, CB and DLA into account when assessing affordability for the amount of mortgage they will give you?

Next issue is, I have around £13,000 of CC debt (failed business venture). No missed or late payments, but a poor credit rating now due to high levels of debt compared to income. My plan was to pay down this credit card debt first and then apply for a mortgage. But, this feels like it will take forever as I've tried but I can't get any consolidation loan or 0% balance transfer card to help reduce the interest costs each month. The amount I'm currently paying in CC payments each month is about £370 a month, roughly the same as the payments on a 15 year £50,000 mortgage at 5% interest rate. So it makes sense to me to move sooner rather than later, pay off the CCs with money that is freed up from this house sale, and then the mortgage payments on the new house replace the current CC payments and my expenses don't actually increase each month. But I have a feeling banks won't see it this way...?

So, the next question is:
Will all lenders automatically be put off by my CC debt and low credit score? Even though I would pay off the debt with the sale of the house and therefore wouldn't have the big CC payments each month on moving?

Obviously I'll talk to lenders once I'm in the job, but for now I wondered if anyone had any thoughts or advice?

Some lenders do take UC until account but to be honest I think your debt will be an issue
It's more than 100% of your income
I work for a bank in an underwriting/audit role and you'd very likely fail credit scoring with that level of debt
Even though it is being paid off
In your shoes I'd start the job and throw every penny into getting it repaid

Meant to add that's not to say a lender wouldn't say yes. You need to speak to a whole of market broker who will know what lenders are likely to say yes

Get a free broker.

Mine would be able to tell me straight what does and doesn’t matter; and then help me find a lender that matched what I needed.

Most lender will take uc, dla and cb into account. Your debt will be an issue though.

So it makes sense to me to move sooner rather than later, pay off the CCs with money that is freed up from this house sale, and then the mortgage payments on the new house replace the current CC payments and my expenses don't actually increase each month. But I have a feeling banks won't see it this way...?

this doesn’t quite make sense… if you pay off the CCs with the house sale and still want to buy a house that’s £50k more than your current house, you’ll need a £66k mortgage which will obv mean bigger repayments.

It’s so much easier to talk to a broker and get quotes for different scenarios - it’s totally free and no obligation. They can give you insight on which lenders are likely to accept you. Each lender will have their own risk appetite about things like benefits.

You owe more than a year's salary on credit cards? No responsible lender should lend to you.

Mortgage adviser here - every lender is different. Many do take benefits into consideration. The debt to income ratio again is something each lender views differently. The best advice I can give you is to speak to a whole of market broker. They'll check all the lenders for you that they have an their panel (always ask how many lenders they have access to. Some have 20, some have 90+). They'll make an assessment and provide tailored advice and recommend the best option for you. Good luck!

Brilliant advice and thoughts, thanks everyone.

Yes, good point Iwritethissittinginthekitchensink, I'd need to rethink my maths a little in this scenario...I guess it would depend on exactly how much I could borrow and the repayments for that...and then maybe accept I might not have as much as I was hoping to spend on a new house. £40k might do it though!

Will definitely contact a broker as soon as the new job starts. I just didn't want to waste their time with hypotheticals. You've all helped clarify a few things in my mind though, thanks for that.

Have you factored in the move costs, solicitors fees and stamp duty etc on your new purchase?

Sorry to confuse things - I meant a £63k mortgage! £50k for the bigger house plus £13k to pay off the credit cards.

It’s absolutely okay to waste a broker’s time on hypotheticals - they will get the business from you at some point! Also from your perspective it gives you a chance to find a broker who isn’t pushy. It’s okay to look out for your needs and be a ‘bother’!