Deposit: 10% debt free or 15% with 10k debt?

peckerwood

Hi all

We have just had an offer accepted on a house and I'm debating my options on a new mortgage. The collateral from the sale of our means we could pay off our debts but which is the best option? Would it be better to have a 10% deposit and no outstanding debts (no credit cards or loans), or would it be better to have a 15% deposit and still have a 10k unsecured loan.

I'm sure I could afford the repayments either way, but which would the lender prefer, more deposit or less unsecured debt/monthly commitments?

Many thanks

Cannon_Fodder

Lenders are likely to require you pay off any debt, or will view the debt as a negative in considering your application and decline you, so keep to 10%.

SPOTTEDCUP

Just a thought but shouldnt you of spoken to the bank first before you started putting offers in for houses you may not be able to get a mortage for?

peckerwood

Thanks for the reply SPOTTEDCUP. I did already have an agreement in principle at 10% with HSBC before we made the offer, and I thought it would be relatively painless to get the formal application approved. However, HSBC turned us down (I've no idea why, they just say its down to their internal scoring system). So before I go through a broker for a new mortgage application I thought I should get some advice on a 10% or 15% deposit.

Jonbvn

Pay off the 10k debt ASAP. This is IMHO the reason you have been refused the HSBC mortgage, as per your other thread.

SPOTTEDCUP

pecker
an aip isnt worth the paper it is written on (if it was on paper probably given over the phone )just think people who go making offers on houses should know they can get a mortgage first. save wasting the sellers time and possibly out bidding buyers who have the funds available