A PUB manager whose credit score was “in shreds” managed to turn his finances around in three years and now owns a £208,000 two-bed house.
Although, Simon O’Brien, 30, is still paying the price for defaulting on overdraft payments and refusing to pay his rent while at university.
He first got into financial trouble when he stopped paying rent to his landlord in a protest over his shoddy accommodation conditions.
The stand-off resulted in Simon getting a County Court Judgement (CCJ) in 2015 – and he still owed £5,000 in rent.
While he was studying, he also took out two overdrafts – adding up to a total of £5,000.
After graduating he took on running a pub in Milton Keynes with his brother.
He lived at home with his mum or stayed on friends' sofas while working full time and paying back the £10,000 worth of debt.
It then took him a couple of years to save up for a deposit as the pub business grew quickly, but as the damaging marks on his credit file remain there for six years he knew it would be hard to get accepted for a a home loan.
Simon bought his three-storey home in 2018 using a specialist mortgage provider because most high street lenders considered him too much of a risk to lend to.
But specialist loans aren't cheap. The new homeowner is paying over the odds for his mortgage – 4.9 per cent interest compared to the 1.49 per cent top rate for a two-year fixed deal.
His poor credit score also meant he had to stump up a bigger deposit of 15 per cent worth £31,200, compared to 10 per cent typically expected of other single first-time buyers.
As his fixed-rate mortgage deal comes to an end next year, he’s hoping that his score would have improved enough to get him a better rate.
We caught up with Simon for this week’s My First Home.
What’s your house like?
My house is about 120 years old and it’s full of character. It’s on a tiny street in a small village on the outskirts of Milton Keynes, on the other side of town from where I grew up.
It’s a two-bed house that’s across three floors – I don’t think you’d call it a town house but it is semi-detached.
I’ve got a small private courtyard around the back that’s big enough for some seating and a small bit of AstroTurf that I’ve turned into mini golf.
It backs onto another small courtyard that’s shared by all of the houses that back onto it.
I think this is something the neighbours bought years ago to stop developers from buying it and building on it.
The previous owners stuck an extension on the back for the kitchen – I’m big on cooking so it was important for me to have a nice space for me to cook in.
I bought the house but my girlfriend lives with me.
Let’s talk money. How much did it cost you?
I bought the house for £208,000, which I was dead pleased with as it’s way below market value.
It was originally on the market for £240,000 and had sold to another buyer but the sale fell through.
The seller dropped the asking price to £220,000 to encourage a quick sale and I offered £209,000, which was accepted.
But the estate agents made a mistake when they were organising the mortgage surveys and accidentally wrote it down as £208,000.
It meant that a new round of surveys would need to be paid for with the correct valuation but in the end the seller just accepted the slight smaller value so the sale could go through.
I put down a 15 per cent deposit, which worked out at £31,200.
How did you overcome your bad credit history?
I have a terrible credit score. When I left uni, I had so much debt on top of my student loans.
I’d maxed out two overdrafts leaving me with around £5,000 worth of debt and a CCJ against my name.
Out of principal, I’d stopped paying the rent for a property that was awful but eventually the debt caught up with me and I was given a CCJ. I owed another £5,000.
I knew that I needed to get rid of the debt as soon as I could so as a student I started working at a pub. It was full-time hours over three days at the weekend, so between 35 and 40 hours a day.
I continued to work there when I left uni, as well as starting and running a catering company with my brother. I didn’t do much else in terms of a social life, just work to pay off the debts.
I ended up taking over the pub franchise, the MK11 Live Music Venue and Sports Bar, with my brother a few months after finishing uni. Back then it was pretty run down.
At first, I defaulted on the repayments because I was focused on turning the pub around but it only made my credit score even worse.
I agreed to set up a payment plan with the debtors to pay off around £5 a month and at the same time, I was saving.
When I had enough money, I would call the debtors and offer to settle with them.
Often, they’d offer to part-settle if it meant getting a lump sum, so I paid back £3,000 for the CCJ and part-settled with one of the banks who I had the overdraft with. I paid back the full £1,500 to the other bank.
I had some savings left over, which was my starting point for buying a house.
My outgoings weren’t much as I was living between my mum’s and sofa surfing with family and friends.
We had to wind up the catering business not long after we took over the pub, so at first all I could afford to put into savings was around £100 a month.
As the business improved, I could increase this amount by a few hundred pounds until eventually I could put £600 a month into savings.
Was it hard to get a mortgage?
For me, it wasn’t a case of just building up my credit score because of the CCJ as they stay on your credit report for six years, regardless of whether you’ve repaid them or not.
It meant that I needed to get a specialist mortgage. I used a broker recommended through the estate agent, which they paid for, to help me with the process.
I’d thoroughly recommend doing this, especially as I’m dyslexic and I find the paperwork overwhelming.
They told me it helped that I’d settled the debt but my poor credit would mean that I’d need a bigger deposit and would pay higher rates because I was a risky borrower.
Actually getting a mortgage in principle wasn’t hard but I did need a 20 per cent deposit. For this house, that would have been £41,600.
If I didn’t have the CCJ then I probably would have only needed a 10 per cent down payment to buy a place on my own.
How to find a mortgage if you've got bad credit
IF you're struggling to secure a home loan due to your poor credit history, then here are some options.
If you have a spotted credit histroy then some high street banks may refuse to lend to you.
As an alternative you can apply for a specialist lender, who is more likely to accept people with poor credit rating.
One thing to note is that these lenders do charge a higher-than-average interest and usually require a larger deposit.
You may need to have at least a 20 per cent deposit saved to apply.
You can use a broker matching service like Online Mortgage Advisor or Just Mortgage Brokers, or go direct to a specialist lender like Accord, Aldermore or Metro Bank.
This article by Which? highlights a number of specialist lenders, how much you will need saved and who they accept.
One of the defaulted payments was wiped from my report right before I wanted to apply for a mortgage for real as it’s six year limit was up.
This meant that the lender lowered the amount I needed to put down upfront to 15 per cent because I was a lower risk. I took out a two-year fixed-rate deal.
I’m paying 4.9 per cent in interest, which is a lot higher compared to other similar deals that offer around 1.49 per cent.
But I figured that because I got the house for such as low price in the first place, what I’m paying in interest will balance out the savings I made on the purchase.
The house has already been valued at £230,000 this year.
Will your bad credit score affect you forever?
No. The bad marks on my credit history will be wiped after six years giving me a clean report.
These should come off over the next few years so I should be able to get a better rate when I borrow money in the future.
How about furnishing the place?
I actually moved in with £10,000 left in my savings because of the last minute lower deposit.
I used it to add an ensuite to the main bedroom, do up the kitchen and buy furniture.
I also saved cash by making things myself. I’m a big fan of farmyard tables with wooden rustic worktops but they cost about £600 on Etsy.
Instead, I bought some wood for £30 in a clearance sale and ended making it myself for £60.
I used sites like TopCashback.co.uk to switch energy and broadband, earning just under £100 cashback.
How did it feel to finally move in?
Getting the keys to the house was ace.
I live next to a pub so I went over there and bought a couple of beers for me and my girlfriend, we ordered pizza and sat on the floor watching TV.
It was a really good feeling. I don’t think I’ll be moving any time soon.
Have you got any advice for other savers who might be struggling?
You have to be willing to give stuff up, otherwise it won’t happen.
Nowadays, I feel like we all want instant gratification but it takes time and a lot of work before you get the rewards.
Hard work pays off, so just graft as much as you can.
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