How can I buy a new home while my partner is facing bankruptcy charges

Posted on 15 March 2008

At present, I own a property worth approx £130,000 with a fixed rate interest only mortgage of 4.79% (fixed for the next 3 years) of £45,000 with the Nationwide. I also have 2 endowments with Legal & General & Norwich Union to cover this mortgage and are due to complete in April 2014.

My income consists of a salary of £12,000 from the NHS, plus £5,198.76 tax credits and I receive £2,700 pa CSA payments for my daughter. My partner receives a salary of £27,800, but at present is paying off bankruptcy charges of approximately £10,000 pa. The bankruptcy is due to expire this May (2008) but there is still some outstanding money to be paid.

If possible, we are interested in buying a house from a friend for approx £210,000 in 6 months time and would expect to sell my property. As a bankrupt, my partner is aware that he cannot legally obtain a mortgage at this time. However, he would like to pay towards the cost of obtaining a property by providing a rental income. In addition, he has a substantial pension which he has paid into for over 20 years and could be used towards a lump sum payout in the future. I will also receive a lump sum payment upon retirement of several thousand pounds.

Hi Debbie,

I'm afraid you can't use rental income towards a residential property, neither are you able to live in a property that has a buy-to-let mortgage on it. Whilst you are allowed to receive £34,250 per year from a lodger, lenders aren't able to use that towards the affordability calculation either. 

It's rarely advisable to use a pension lump sum to settle a mortgage debt, as pensions tend to be sorely needed as income when the time comes.

You are right that bankruptcy rulings include a ban from mortgaging for 12 months, but as such, no lender can accept your partners input in any way for this mortgage, even if it is some sort of support to you.  However, if you are not buying until after May, then your partner would be out of the 12 months period.

You personally have £85,000 of equity, however an income of £12,000 will only get you a loan in the region of £50,000.  Very few lenders will accommodate maintenance or tax credits as an income, and by the sounds of it, you are stuck with a fixed rate on a Nationwide mortgage anyway, which you would have to port if you want to avoid the hefty penalties.

Until your partner's income can be taken into account in some way, you are not able to afford the mortgage of £125,000 that you would need for the purchase you have in mind.  So it is a matter of patience, and ensuring that all of the credit agreements that you have currently are maintained spectacularly.

Best of luck.

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