will lenders ignore CC debt?

skf1979

Hi.I am new to this site so please bear with me if I ask a question which has already been answered.

After 12 years of renting, and having to move the kids time and time again, we have decided we would like to buy at some point in the next year or so.

We know we will need at least a 10% deposit, but I have a few questions;

1. I have heard that lenders ignore credit card debt that will be paid of within 6 months, is this true? I have just paid off £2,500 so my balance is now nil. Would I be better off spending on the CC and putting all the extra cash into our deposit pot, as we know we could pay off the CC in full within 3 months when we finally get a mortgage? I don't mind paying extra interest in the short term.

2. I have a loan which will have a balance of about £14 k when we go for a mortgage. Once we buy, any spare cash could into a pot to pay this off within 18 months. Should we go for a discounted rate if poss. knowing that we will not have the loan debt once the rate goes up, or would we be better off sticking with the loan payments and overpaying the mortgage? (If we can get this facility)

3. We both have overdraft facilites of between £1,200 and £2,000 which we dont use anymore. Would our credit ratings go up if we used these a bit more, and paid off in full at end of month? My credit rating is 999 with experian, my partner's is 900 and something, in the good category. His only credit is the unused overdraft.

We earn about £57 k a year between us, have secure jobs, and have about £6,000 saved so far. (I only started working again full time 9 months ago and we had to replace the car hence the pitiful pot!) We save at least £1200 per month on average, with the extra set aside for xmas,summer hols and emergency funds etc.

3 beds in our area are about £190000, we currently pay £850 a month rent, fell we could comfortably afford a mortgage and we would like to buy in about 18 months time, before prices begin to rise too much again, so we will only have a 10% deposit or so after stamp duty etc.

Are we better off having a smaller debt but a smaller deposit? or a larger debt, but a larger deposit?

Any help much appreciated, and apologies for the long post!!!:j

Thanks!

Joe_Bloggs

Welcome to the forum.. It can be a rewarding experience. Read MSE Martin's articles when you get time. Who knows what the financial situation will be after the General Election ?

My mortgage lender frowns on debt of any other sort. The Nationwide are puritanical in these matters.
It is not uncommon for MSE forum members to appear to have savings whilst having even more debt, costing far more in interest than the equivalent amount they earn in savings. You may be hurting your ability to save, for the future, by paying interest on money that you did not need to borrow.

This is only my opinion and in no way a criticism of your encouraging financial circumstances.
J_B.

nervousftb_3

In terms of using your overdraft, then no I don't think it would help (don't think they affect credit rating? I may be wrong...). When you apply for a mortgage, the lender usually asks for 3 months bank statements, and if you are seen to be living in your overdraft (even if you are back to zero every month) then this implies to them that you cannot afford a mortgage as you are living on borrowed money. With a score of 999 there is obviously no point in trying to improve your score as it is perfect (in experian's eyes anyway).

If I'm wrong and using your overdraft would imporve your partner's score, then make sure you are rid of the overdraft at least three months before you apply, so that your bank statements will show you consistently in the black.

CLAPTON

most (maybe all) lenders take debts into account in deciding how much they will lend
they do it in different ways so its difficult to predict which is the less harmful debt.
in any event it may be different in 18 months time.

best to keep it simply and pay off the debts asap and certainly stay out of the the OD.

why not try some of the lender websites and put your details in and see the results .. try e.g the nationwide one

SPOTTEDCUP

I was advised by halifax a 3k cc balance wouldnt matter to much
however if you only have a 10% deposit you will not qualify for most of the mortgages with a 14k loan and those that except you would be charging at least 6% plus for a fixed rate