Mortgage/debt questions - please help

linnyp

Ok. Scenario. About to sell house for £130K - mortgage outstanding = £60K leaving £70K profit. Needing to get the highest mortgage possible for new house but also have £20K in debt - a mixture of loans and credit cards.
What is the best next step? To pay the debt off completely from the £70K profit thereby reducing the amount to put as a deposit for the new house?
Or to not pay it all off straight away so that there would be a bigger deposit?
Do mortgage companies just deduct the whole outstanding debt from the amount they will lend? Or is there any debt they 'turn a blind eye to' when it comes to working out how much they will lend?
I can see that paying it all off out of the £70K seems to make most sense - but we're really at the edge of being able to get enough mortgage so need as much deposit to bump it up as possible.
Hope I've made sense there - look forward to hear what people think.

MortgageMamma

Hi There

Without doubt pay it off with the 70k. you will be saving yourself interest on your debts and taking such a large mortgage with debts could be crippling. Most lenders will take your total monthly debt payments x by 12 then deduct from income before multiplying but there are exceptions to this rule. Mortgaging to the max is something that needs serious consideration on your part.