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What You Can Do After Bankruptcy

In the following scenario you will learn about Gerry and what happened to him in the last six years. You will also find solutions to Gerry’s current problems in the mortgage market to help you find your own solution. Gerry had his own business until 2001. Unfortunately due to circumstances he had to file for bankruptcy. After four years the bankruptcy was discharged and it seemed his life was going to be on track; a year later Gerry obtained a divorce. The divorce costs were rather high, which left Gerry with five CCJ’s, and one missed mortgage payment in January of this year. Gerry is still trying to get his life back on track. His also wants to buy a property for ₤240,000. To do this he would have to borrow ₤216,000 on a salary of ₤55,000. When you calculate out the amount of the loan he would like to borrow you see that it is 90 percent of the total property value. There are three scenarios that can help Gerry obtain what he would like to have.

First one must look at the current mortgage situation. Many companies are not going to want to loan money to Gerry because he is perceived as a bad risk. You will find that Gerry’s bankruptcy and five CCJ’s are going to hold him back with most banks. There are some lenders who will offer mortgages to someone like Gerry; however the missed payment and the CCJ’s will be a factor. Before seeking a lender Gerry needs to work on his credit. In other words he needs to re-establish his credit by repaying the CCJ’s or getting them dismissed. He also needs to make at least one straight year of mortgage payments. An adverse mortgage is one option for Gerry in his current condition, but he has to find a bank willing to lend him the money. In some cases adverse mortgages can be loaned if the missed mortgage payment is over six months old, and the defaults have been discharged.

In another scenario Gerry may have to wait a little longer for his mortgage. Mortgage companies that have LTV’s must reduce these before they can think of lending money to others who need sub prime mortgages. It is also important for Gerry that he keep his borrowing amount at 85% or less of the property value. This will help him look favourable to the sub prime lenders. Gerry will also have to realize that the interest rate charged is going to be high due to his bankruptcy, and CCJ’s.

The other option for Gerry is going to be similar to the second option. Gerry must reduce his current debts. In this case he needs the five CCJ’s to be paid off our dismissed before a lender will loan him any money. Gerry must also increase the deposit he is going to apply to the house. At this point he is opting for 10% of the purchasing price. If he can give 15% than he will look more favourable to the lenders available for adverse mortgages. His best option is choosing a different property. If he were to buy a place for ₤180,000 and borrow less than 85% he would be able to receive a mortgage at some point in the next year.

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