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A real mind twister! Not sure if the unusual mortgage section is correct but I have an interesting situation...
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grahamashbury
2 Posts
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29/06/2021 - 1:39 pm

Hello, I was wondering if someone can help me with regards to my situation – provide some advice. Many thanks in advance.

Facts:
– I own a residential property valued anywhere from £320,000 – £340,000.

– I have a primary mortgage on it for £98k
– I have a secondary mortgage (secured loan) for £58k
– I have a debt management plan that I have been in for 2 years now via Stepchange. This has £75k remaining on it. If I had a lump sum to pay it off, I could do so with circa £60k as a max.
– I am self employed and earn anywhere from £60k – £90k per annum. The higher in recent years.
– My partner earns £50k gross per annum (all details above are on my name only)

Would it be possible for me to?
– Take my existing house, change that into a Buy to Let
– With the equity taken out from the house I would pay off the second loan on the house, the main loan of course as well as negotiate and pay off the existing DMP.
– With the remainder of the equity, use that for deposit and buy a new residential property

The problem I run into currently is, I have the means to pay for a new property, as well as pay for the existing one (as a buy to let). I just don’t have the credit history or a permanent job to prove that I can. So in essence, I would need a lender to look at my situation very critically, see my current outgoings and see that I can pay it off just fine. For example, my DMP payments alone are at £944/month. With the two mortgages on my house, I’m at £900 too. So clearly, I can easily pay £1,800. That’s not even counting any other outgoings.

NB. All would be done together with my partner as a joint new application

Any and all advice would be appreciate. Thanks in advance again.

Sincerely,
Graham

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157 Posts
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29/06/2021 - 1:40 pm

Hi Graham,

Thanks for the detailed summary of your situation.

Nothing you have said is impossible, although we often say on here that it will come down to the finer details. I have summarised the first questions any broker should be asking and information for you to consider

If not already done you will require a copy of your credit file in order to assess the details of the adverse credit recorded. The dates, values and if defaulted or concurrent missed payments make a significant contribution on lender selection.
It is imperative that the DMP has been well conducted and almost every lender will want confirmation via Stepchange to this effect.
The rental valuation of your property you propose to let will be critical to your borrowing power as many lenders have many different income yield measurements for affordability purposes.
The reason for the adverse credit and requirement for a DMP and second charge borrowing (which typically implies previous debt consolidation)
Lastly and I suspect most importantly will be how you derive your self employed income. Ability to repay historic debts will not be factored into your the lender affordability model and all will want evidence of self employed incomes. Once again here lenders all have their own criteria here and in these situations lenders almost always want your personal and business bank statements to verify the income to the HMRC declarations. (Tax Computations) Some lenders will take net profit but this comes down to the finer details of the company and company ownership structure.

With this in mind it would be prudent to locate an experienced mortgage broker I imagine..

Best of luck

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grahamashbury
2 Posts
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29/06/2021 - 1:41 pm

Hi Hayley,

Many thanks for that.

How would I go about locating the experienced mortgage broker?

GA

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157 Posts
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4
29/06/2021 - 1:41 pm

Most welcome,

It is difficult to answer this objectively because obviously this is all we do and therefore an easy answer is to call me/us.

In more general terms all Mortgage Brokers should be regulated and therefore genuine review sites such as Feefo, Trustpilot and Reviews IO are likely to provide you some decent reassurance.

All the best

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