save a deposit or pay off debt?

barriejohn69

We are looking to move in the next year or two and I was wondering would we be better clearing our £20 grand in debts (no payments missed) or putting £20k towards a deposit?

We could raise a 10% deposit through the profit from our existing house and would be looking to up our mortgage from £85k to around £130k.

I know its a bit sketchy but I can put up any more details needed.

Between us we earn around £50k if that helps

Pee

What are the interest rates like on your debts? The debts will affect you mortgagability, so clearing them will make it easier to get a mortgage.

Dave101t

i would always clear debts first, if nothing else its a black cloud gone, and will put you ahead of others for future financial considerations

barriejohn69

Thanks, I didnt know whether mortgage lenders looked at the deposit as a better thing than no debt or vice versa. The interest rates on the debts are higher than my mortgage (unsecured loan and credit cards).

Pee

Then I think clearing the debt is the way forward, maybe half to clearing debt and half into an ISA, so you can see those savings grow. (Or half into a credit union, with a view to borrowing a deposit off them? I don't think this is really legal, as it is still borrowing, but it is what I did to get a house.)

opinions4u

In your circumstances, I would look to do both.

Building up a bigger deposit may allow you to access better mortgage deals. It may not be wise to stick with a 10% deposit and lower debts!

The time of moving could be the time to clear the debts though - when you know exactly what you need to borrow and exactly what deals are on the table.

If you do choose to chip away at the debt, go for the highest interest rates first, where no early repayment charges apply. Usually credit cards and overdradfts.