Save for deposit or pay off debts?

liz09

Hi,

Any help appreciated. Me and my boyfriend want to buy a house in Oxford and to do this we'd be looking at a property in the region of 200 - 250k. We have no savings. I have 8k of debt and boyf has approx 15k.

We're paying this off quickly and if we weren't buying a house would expect to be debt free in less than 2 years. However Oxford property moves fast and by then our wages probably wouldn't guarantee a mortgage on the house we want.

Therefore we want to buy a property next summer (ish!)

Do we:
A - pay off as much debt as we can so we can pay more repayment / interest only mortgage (accepting the fact we will need a 100% mortgage as we have no deposit)
B - move the debt to cheap repayments (i.e. 120 month loans, credit cards with low repayments) and thus save the repayments to build a 5% deposit?

Second issue if we go for A can we even get a 100% interest only mortgage - do they exist. I'm bonused heavily (quarterly) so an interest only makes sense.

Thanks in advance
Liz

*Sparkle*_3

I'll keep it short but never the less important, Definately pay off debts!
you dont want to be paying off a mortgage and when the interest rate goes up you'll be stuck paying for these horrible debts.

best wishes

robwend

cant believe your askin people, common sense says debts,banks hardly going to look at you with your debts and give you a good deal now is he,god!! showing my age!!lol 10 years ago id be sayin"live it up travel the world!!"

*Sparkle*_3

robwend wrote:

cant believe your askin people, common sense says debts,banks hardly going to look at you with your debts and give you a good deal now is he,god!! showing my age!!lol 10 years ago id be sayin"live it up travel the world!!"

But robwend, you'd think that banks would say no (most prob would) but just see the other thread about banks looking out for people like this to lend money to because they know they will always have a good return on there cash because people like Liz (just using you as an example) cant ever pay it back.

liz09

I understand what you're all saying. However reports from friends of mine that have got mortgages recently tell me banks look more at what you can afford these days rather than debt.

I.e. our debts were from Uni days and now I comfortably pay back about £600 - 800 a month, therefore paying my 8k debt off in 10-12 months. However making these large payments I can still afford to comfortably live.

I know you weren't specifically putting me in the bracket you mentioned, however I definitely don't belong to the can't afford category. I'm just moving from the in student debt category to being able to easily afford a pretty decent mortgage and therefore don't want to lose out on any more upward movement in the housing market!

Hope this makes more sense!

robwend

liz09 wrote:

I understand what you're all saying. However reports from friends of mine that have got mortgages recently tell me banks look more at what you can afford these days rather than debt.

yes they want to know yearly income and children, they have a set guideline on how much money you can afford to be left with per month to pay a mortgage with. and all debts are included in that, the more debt you have the less you can borrow,its common sense, so pay off those debts then save save save

lynzpower

Some lenders will minus what your debt is and multiply it. SO halifax took my debtx by three and deducted that from what I wanted to borrow.

PAy off your debt as fast as you can is my advice.

xela_17

To the question about the interest only 100% mortgages: we had a 100% graduate mortgage with HSBC. It was called homestart and for 3 years you could pay interest only. (By that time you would probably want to change to a different mortgage anyway). The only bad thing was that the interest rates weren't the best but then they never are with a 100% mortgage anyway, interest only or not.

clutton_2

pay off debts super super fast !!

tomstickland

Clear the debts first.