whether to pay off debts with savings for deposit?

AndrewW

Hello there all.

Thanks for stopping to read this. I am currently saving for my deposit for my first house. I have saved approximately £10,000 so far (aiming for £20,000) but I have debts of £5,000 currently sitting on an interest free credit card (0% for the next 12 months).

Now, my question is, would I be better leaving the debt on the card, thus giving me an extra 5k towards my deposit when I finally apply for my mortgage, OR, should I pay the debt off. My concern is that I don't want to be stuck 5 grand short of the deposit I need for my first home, just because I paid off my debts?

In the eyes of the banker considering my mortgage application, which would be the better solution??

Cheers all, your advice is very, very much appreciated.

Andrew

opinions4u

AndrewW wrote: »

Thanks for stopping to read this. I am currently saving for my deposit for my first house. I have saved approximately £10,000 so far (aiming for £20,000) but I have debts of £5,000 currently sitting on an interest free credit card (0% for the next 12 months).

While you're still on 0% I'd continue to build up the savings and maintain the credit card accordingly.

You need to review the situation closer to the time of making an application for mortgage on a specific property - asking yourself what mortgage deals there are, what deposit they need and what extortionate rate will the credit card company start charging you.

Now, my question is, would I be better leaving the debt on the card, thus giving me an extra 5k towards my deposit when I finally apply for my mortgage, OR, should I pay the debt off. My concern is that I don't want to be stuck 5 grand short of the deposit I need for my first home, just because I paid off my debts?

You don't give any indication of likely purchase price, but the bigger your deposit the better the mortgage deal. The bigger your debt, the less you will get in way of mortgage.

Gut instinct is to ditch the credit card debt just before it starts charging you interest, but you will have to make sure that you have enough savings for deposit, legal fees, survey fees, arrangement fees etc.