Mortgage availability with debts to clear

nodebt_2

Hi, our house will be on market in next couple of weeks and I'm concerned about how easy it will be to get another mortgage. We have about £40K of debts which we will clear on sale of house. We intend to have at least 15% deposit, maybe 20% if house sells for price we want. We will want a 5yr fixed rate mortgage. I'm sure I've read threads where mortgage company doesn't accept your word that you'll pay debts off and includes them in your mortgage offer? If this is the case would we be better going into rented for 3-6months having shown our debts have been paid off and would we then get a better offer? We have no problem going into rented as we're not sure what type/area we want to live in so it would give us some breathing space - are there any pitfalls I might not have thought of? Advice greatly appreciated.

Mrs_Bumble

If your intention is to clear all debts on sale of your house then that shouldn't be a problem. If you make an application before the sale completes you will need to make it clear that everything will be cleared on completion if the lender is concerned about that at all then they can apply a clause to your mortgage offer etc but that doesn't cause a problem for you as you will be clearing them so I wouldn't foresee it being an issue.

On the flip side if you are not sure where you want to purchase then it might be a good plan to go into rented for a while?

herbiesjp

There should be no problem with this

If you are clearing debts, then the lenders will take those debts out of the affordability calculation when looking at what amount they could lend you.

If they were to remain, obviously £40k of debt would impact quite greatly on your mortgage potential

Just make this clear to either the lender direct or the broker you use