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  • FIRST POST
    • LJE091
    • By LJE091 18th Apr 17, 5:45 PM
    • 13Posts
    • 0Thanks
    LJE091
    Overdrafts/ Debt & Mortgage application
    • #1
    • 18th Apr 17, 5:45 PM
    Overdrafts/ Debt & Mortgage application 18th Apr 17 at 5:45 PM
    Hi,
    My OH & I are hoping to buy our first house soon. We're not on a high income and so we've been working hard on clearing our debt. I don't think we have a huge amount of debt but since we don't earn a lot we want to improve our chances of being accepted and being able to borrow a reasonable amount.

    We currently have £1,200 on a credit card which we've got down from over 3k in the last 6 months. We've gone back to paying just over minimum payments on this as the remaining balance is at 0% for another year.

    My OH has an overdraft from his uni days - now down to £1,800, which he pays £30 each month in interest & fees. This is his main account which his wage is paid into..therefore he's 'living in' his overdraft each month.

    My question is - since he's currently only paying interest & rarely paying any of the actual debt off we were considering him applying for a 0% money transfer. That way he wouldn't always be in his overdraft and payments would actually be paying off the debt - is this the best way to go about this? Would an application for credit negatively effect a mortgage application & if so how long should we wait after before applying for a mortgage?

    Thanks in advance!
Page 1
    • Lilla D
    • By Lilla D 19th Apr 17, 9:27 AM
    • 308 Posts
    • 154 Thanks
    Lilla D
    • #2
    • 19th Apr 17, 9:27 AM
    • #2
    • 19th Apr 17, 9:27 AM
    If you transfer the debt to a 0% card, then normally there's a transfer fee to pay (3-5%), which in case of £1800 is about £54-£90, i.e. 2-3 months' worth of currently paid interest. But you're right, after this, at least the payments would reduce the debt, which otherwise you struggle to get rid of.

    While some lenders ignore overdraft debt, most lenders take it as a commitment and would reduce your potential borrowing along with any credit card debt even if they are on 0%.

    As you're planning to buy a home, I assume you have some cash available for deposit and purchase related costs. It might be an idea to use part of this cash to pay off your debt and save up again to avoid wasting more money on interest/fee payments.
    I am a Mortgage Broker
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
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