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Deposit or debt?
lillib77
Posts: 12 Forumite
Hi
My husband and I have just managed to sell our house and for more than we hope! Which is obviously great news. However we have debts of around £25k.
My husband wants to take the extra money we earned and add it to the money we have saved for a deposit for the new house.
However I think it would be a better idea to pay off some of our outstanding debt.
What's the best course of action?
Thanks
lillib77
My husband and I have just managed to sell our house and for more than we hope! Which is obviously great news. However we have debts of around £25k.
My husband wants to take the extra money we earned and add it to the money we have saved for a deposit for the new house.
However I think it would be a better idea to pay off some of our outstanding debt.
What's the best course of action?
Thanks
lillib77
0
Comments
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Everything depends on personal circumstances... BUT...in my eyes you should always get rid of debt first.0
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With a larger deposit you may be able to get a better rate on your new mortgage. BUT any saved interest here is likely to be far outweighed by the interest rate you are paying on your debt (unless it's very cheap student debt or similar). And also you may find it easier to get a good deal on your new mortgage if you have no outstanding debts to service. So overall it seems likely that you'd be better off paying down the debt.0
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debt first....definitely!0
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Debt first unless you're on the margins of one of the LTV hurdles e.g. you have a 24% deposit and by retaining some of the extra money will have 25%.0
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Bexinlondon has it spot on in my opinion. Your mortgage adviser should help you decide.0
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mortgage companies will probably take debt into account when calculating your deposit anyway so it's not really going to help much.0
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Debt on your next application will look bad against the deposit. Better to have a smaller deposit and no debt showing. You'll end up with a bigger choice/better deal on the bottom line.0
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What kind of debt is the 25k? Is it secured or unsecured?0
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I'm not sure if it's true that debt is counted against the deposit. When we were applying for our mortgage (Mar 09) the credit card debt I had then affected the affordability calculations (repayments at 10% per year were assumed) but did nothing to our LTV as it was unsecured debt.0
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