Question: My boyfriend bought a flat two and a half years ago, which he could then easily afford thanks to regular bonuses at work. But those bonuses dried up 18 months ago, since when he's been overspending and running up huge credit card debts.
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He missed a couple of credit card payments in the run-up to Christmas but says all will be fine when he increases his interest-only mortgage after his current fixed-rate deal expires in six months time, and he can pay off these debts. Am I worrying over nothing?
Answer: No, you are not. I think your boyfriend may not realise how much the criteria for lending has changed in the last couple of years. A good credit score is essential if you are to get a competitive mortgage interest rate and a bad one might prevent you getting a mortgage altogether.
Your boyfriend must understand that missing a couple of credit card payments can have an adverse affect on his credit score and is likely to make it difficult for him to get a new mortgage from either his existing lender, or a new one.
I see that he would ideally like to increase his borrowing but he must remember that with most interest-only borrowing, many lenders now require a borrower to sign a form of declaration confirming that he or she has a repayment plan in place to repay the capital at the end of the mortgage term.
Your boyfriend needs to appreciate that getting mortgage funding is no longer easy for anyone and he must get his finances in order and look after his credit score. He can try to improve it by making sure that over the next six months he does not miss any more credit payments.
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Fiona is a partner in the residential real estate team at Thring LLP (www.thrings.com).
These answers can only be a very brief commentary on the issues raised and should not be relied on as legal advice. No liability is accepted for such reliance. If you have similar issues, you should obtain advice from a solicitor.