Default and Let to Buy

Posted on 9 March 2012 by Scott

Hi, we were recently refused for a mortgage due to our credit report. We wanted to let our current property out and buy a new one for 148,000. The value of this property is 169,000 and our outstanding amount is 82000 . I earn 30.000 p/a. I have always had a good credit report but my partner took out a loan and lost her job, she did remain paying but not the full amount 75.00 instead of 128.00, my partner took out the loan and didn't realise she had a default until now, I didn't take the loan out but I have it too.


The default will appear on your credit file as well your partner's because you have a financial association, which may be something like a joint bank account, credit card or utility bill.

There is a good reason why your partner fell into payment difficulties and she acted responsibly by contacting the provider and agreeing the reduced payments rather than not paying anything.  This can be taken into account if you approach a lender who is prepared to make an underwriting decision rather than rely on a computer, which will probably say no.

You will need to get permission to let from your existing lender or arrange a remortgage on to a Buy to Let deal.  Unless you have a deposit saved for the new purchase I suspect you will need to raise this on your current property and the total lending will be based on the anticipated rental income rather than your income.  As a guide the monthly rental should be at least 125% of your monthly interest payment.

I believe we can help you and that you would benefit from speaking to one of our independent mortgage advisers.  Please call 0344 346 3672 and tell the consultant the date and title of your question, they will then be able to help you find the right mortgage for your situation.


Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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