Couple refused mortgage due to bad credit history find way to buy £158k two-bed house – here’s how you could do it too
Ben Link, 30, was rejected for a mortgage in 2017 thanks to his blemished credit history following a bunch of defaults on payday and personal loans
All recommendations within this article are informed by expert editorial opinion. If you click on a link in this story we may earn affiliate revenue.
A YOUNG couple managed to get on the housing ladder despite racking up £8,500 worth of debt from personal and payday loans.
Ben Link was rejected for a mortgage in 2017 after he and his fiancée decided to buy the home they were renting, thanks to a tattered credit history.
Ben and Kathrynn Topps, 25, a teaching assistant, had been renting the two bed terrace in their hometown of Cheltenham for five years.
The landlord, a childhood friend of Ben’s, wanted to sell up and gave the couple first dibs on making an offer on the house.
Their offer of £158,000 was accepted.
But in the back of his mind, Ben, a project manager for an aviation company, knew he might have problems getting a mortgage.
Ben, 30, has a blemished credit history following a bunch of defaults on payday loans and personal loans as well as two county court judgments (CCJs).
Ben says: “I racked up a load of debts during university and foolishly continued to live beyond my means for about four years after.
"I ended up owing around £8,500 in personal loans and payday loans.”
Ben was fortunate to be able to pay these loans off with inheritance left by his grandmother who passed away last year.
Ben says: “Even though I was debt-free and Kathrynn’s credit file was squeaky clean, my credit history was in tatters with a long list of missed loan repayments.”
Ben sought advice from a mortgage broker recommended by a friend.
Tops tips: How to improve your credit score
THERE are lots of ways to get those numbers higher and here we run down solutions to improving credit
- Pay your bills
Late payments, even if only slightly e.g. a few days, can have major negative impacts on your file. - Stay up to date with payments
Good credit is mainly about consistency, the longer you leave bills unpaid the more points you get knocked off your score - staying up to date with your direct debits and bills is key! - Contact your creditors
If you communicate with your creditors when you are having trouble making ends meet, you might be able to set up payment plans. - Paying off a collection account will not remove it from your credit report.
It will stay on your credit report for up to seven years. - Use a credit-builder credit cards
These cards tend to have high interest rates compared to normal cards but if you can show you're a responsible spender with them, it can improve your chances in the eyes of lenders.
The broker told Ben the application had been rejected and that there were no lenders that would offer him a mortgage with his adverse credit history.
Ben says: “I didn’t want to let Kathrynn down - or my friend who was selling the house.
“I felt very embarrassed to be in this situation and didn’t tell anyone about the rejection.
“Instead I sat at the computer and searched online for anything or anyone that could help me."
Ben came across Online Mortgage Advisor, which is a specialist broker for would-be borrowers with poor credit histories and complicated financial circumstances that means they don’t qualify for home loans on the high street.
How to find a mortgage if you've got bad credit
IF like Ben you're struggling to secure a home loan due to your poor credit history, then here are some options.
If you have a spotted credit histroy then some high street banks may refuse to lend to you.
As an alternative you can apply for a specialist lender, who is more likely to accept people with poor credit rating.
One thing to note is that these lenders do charge a higher-than-average interest and usually require a larger deposit.
You may need to have at least a 20 per cent deposit saved to apply.
You can use a broker matching service like Online Mortgage Advisor or Just Mortgage Brokers, or go direct to a specialist lender like Accord, Aldermore or Metro Bank.
This highlights a number of specialist lenders, how much you will need saved and who they accept.
The site takes your information and matches you with mortgage brokers around the country who specialise in helping so-called “mortgage misfits”.
Ben says: “I contacted Online Mortgage Advisor to explain my situation and got a call the very next day from a broker from the Finance Advice Centre.
"The broker, Jason Pulsford who is based in Bristol, said he could help.
“It sounded too good to be true after the rejection,” says Ben.
“But sure enough I had a mortgage in principle agreement in just 48 hours.
“I was over the moon - and very relieved I didn’t have to tell Kathryn that we couldn’t buy the house after all.”
It took several months for a formal mortgage offer to be made because they had to confirm that the debts had been paid off.
“There was a lot of paperwork involved to confirm debts had been paid off and what was behind the CCJs,” says Ben.
“They were for unpaid water bills amounting to just a few hundred quid.
Ben and Kathrynn took out a two-year fixed rate mortgage with Vida Home Loans at a rate of 5.05 per cent.
The couple are paying a higher rate than average, where most lenders today offer similar deals with interest rates between 3.4 and 4.5 per cent.
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a grim task but there are schemes out there to help first-time buyers own their own home.
Help to Buy ISA - It's a tax-free savings account where for every £200 you save, the government will add an extra £50. But there's a maximum limit of £3,000 which is paid to your solicitor when you move.
Help to Buy equity loan - The government will lend you up to 20 per cent of the home's value - or 40 per cent in London - after you've put down a five per cent deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime ISA - Another government scheme that gives anyone aged 18 and 39 the chance to save tax-free and get a bonus of up to £32,000 towards your first home. You can save up to £4,000 a year and the government will add 25 per cent on top.
Shared ownership - Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25 to 75 per cent of the property but you're restricted to specific ones.
"First dibs" in London - London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative - A government scheme that will see 200,000 new-build homes in England to be sold to first-time buyers with a 20 per cent discount by 2020. To receive updates on the progress of these homes you can register your interest .
Ben says: “I know it’s a higher rate than the high street lenders charge but I figure it’s better to get on the housing ladder sooner rather than later.
“Plus, at some stage we will be able to switch to a mainstream mortgage lender when my credit file is clean.”
Ben and Kathrynn borrowed £119,000 with a £39,000 deposit.
They paid a broker advice fee of £495 to Finance Advice Centre as well as a £300 “kick off fee” which is refundable if the team is unable to help.
“We completed on the house in April and the monthly mortgage repayments at £601 even cost less than what we were paying in rent,” says Ben.
The pair are now saving for their wedding which is booked for May 2019.
MORE FOR FIRST-TIME BUYERS
“We are really excited about getting married. I’m glad we can become husband and wife in a home we can call our own."
David Bird, director of Online Mortgage Advisor, says: “There are still major misconceptions about mortgage eligibility.
"It’s fair to presume that a huge amount of people who could potentially own a property, are discounting themselves without even trying.
“The key to truly understanding your eligibility for a mortgage is getting the right advice for your situation.”
Sun Savers is your key to treats, cash and prizes
SUN SAVERS is the best way to get a FREE fiver in cash - and so much more!
- FANCY some free tickets to popular attractions in the UK?
- Or exclusive access to competitions where you can win big cash prizes?
- Or maybe, you want to get a great deal on your Christmas Hamper?
- Join Sun Savers today! We’ll even throw in a free fiver!
We pay for your stories! Do you have a story for The Sun Online Money team? Email us at [email protected] or call 0207 78 24516. Don't forget to join the for the latest bargains and money-saving advice.