Poor Credit Ratings

Posted on 23 March 2011 by Claire

I have a long winded, complicated situation here unfortunately!

My two younger brothers and I recently inherited our fathers house (worth approx. £140-150k) and also his pension and savings. One of my brothers was living there at the time my Dad passed away, and he and his girlfriend would like to buy us out (which we have all agreed on) but he is worried his credit rating may hold him back.

Would the fact that he already has a third of the share of the property help them obtain a mortgage more easily?

Also, my boyfriend and I currently live seperately, he already has a mortgage on a property bought for £103,500 three years ago, has got the balance down to about 97k, however has unfortunately fallen into arrears (of about 4k) due to 3 consecutive redundancies, all resulting in a drop in pay with each new job! He has done an income and expenditure breakdown and he earns less than he pays out!

What are the chances of him being allowed to downsize to a cheaper property by his current lender? (Coventry building society) and if I was to put down a reasonable deposit from my inheritance so the monthly mortgage payment was less and also the rate of interest, would that go in his favour?

Another problem being, his mortgage is in joint names with his Brother in Law who let him use his name and income details so that he could get accepted for a mortgage (as on his own he didnt have enough to buy when the market was good) he has no interest in the property and has never paid anything towards it and wants his name off it.

Ideally I would like my name to go on it, however the next problem is I have a terrible credit rating and so does he!

We have seen a property we are very interested in at 99k and some of my Dads estate is about to be released so will have roughly 16k just now to use from that plus any profit if my partner was able to sell. And obviously if my Brother obtains a mortgage, then my third share of our Dads place (although cant see that being anytime soon!)

Do you think there is any hope for us? Or would another option be for me to put money down and not be on the mortgage as such but be written into the contract somehow? Is that possible?

I'd be really grateful for any advice you can give!


I think it is best to answer these in the same order you have asked them.

With your father's house it might help slightly that your brother already owns a third of the property and would be looking for a mortgage of around 66% of it's value. Ultimately it will depend on their income and credit records and he can either apply for a mortgage and see if he gets turned down or, more sensibly, get hold of his credit records and then take the advice of a local independent mortgage broker before applying.

In your partner's situation I doubt Coventry would be willing to allow him to take a smaller mortgage and would see it as an opportunity to get his mortgage repaid and off their books. My advice for your brother really stands for you too and until your exact credit records are known no one will be able to advise you on which Lenders may grant you a mortgage. I recommend that you get a copy of your credit reports from one of the major Credit Reference agencies: Experian, Equifax or Callcredit, the maximum cost to see your statutory report is £2 and you can view it online or get a copy by post.

Whilst his brother in law is named on the mortgage Coventry have every right to pursue him for the outstanding payments and if the worse came to the worse and they sold at a loss in possession he could be sued for the loss just the same as your partner. You may just want to remind him off this.

With regards to putting money into the purchase but not being on the mortgage this is possible. However, I recommend that you take independent legal advice before agreeing to anything. You may find that Lenders are not happy if you will also be living in the property as you may have a prior claim should they need to repossess. I think that this combined with a poor credit record could prevent your partner actually getting a mortgage and it is more likely you would be better buying together.


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.

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