Mortgage advice

3011gillian

Hi, be gentle first time buyer alert!! the husband and i have decided to start the process of saving to buy a house. we will be moving back in with my parents for around 6 months (oh the pain!) so we can save up for a deposit.
we are looking to save £20k and will probably be looking to purchase a house for between £80k and £110k depending on what work needs doing.

obviously we have some time whilst we are saving to speak properly to mortgage advisors etc but just wanted to see what people generally think. we earn £55k between us and have about £2k overdraft each and a few hundred spread between us on cc's mainly due to our wedding and honeymoon costs last year. we hope to make a good dent in these debts over the next few months also.

so given that i have some questions, are 1)our debts sufficient to prevent us getting a mortgage? 2)would we be best to use the savings to completely clear all debts and therefore have a smaller deposit, or put it all as deposit and work on the debts as we go along?
ideally we would clear the debts and save for the full deposit but i don't think i could bare living with the 'olds' for any longer :eek:

Cannon_Fodder

The interest you pay on the debts will be higher, most likely, than you can get on savings while building your deposit. Silly to pay 18% or whatever on credit cards, while saving at 3%. Even if a 0% credit card, it would be a good idea to get out of the habit of leaving an outstanding balance, so when that introductory period runs out you are not caught unawares.

If you are serious about getting to £20k in 6 months, then you should be able to clear the debts in the first month, two at most, then crack on with the deposit.

This also has the advantage of allowing time for your 'clean' status to work through fully into the credit history system - different elements can take 3 months or more - but make sure you review your credit history using Experian etc, as soon as you think you have paid things off, to identify and tackle any hidden issues.

Good luck with being in your own place for next Xmas! That should encourage you to be disciplined.

delmar39

As per what Cannon Fodder has written above I'd target your debts. When you go down the mortgage application route any outstanding debts will be picked up through the credit check and your solicitor will be charged with ensuring redemption of any personal loans on completion. So you're better off doing it now. Good luck!

steve237

I also would definitely want to be getting myself out of any £2k overdraft and paying off the credit card before thinking about anything else.

I use my overdraft facility regularly, up to a couple of grand every now and again, but only if I know I can get straight again within a month or two. Try and imagine you were in a position where one of you lost their job; the overdraft facility could prove very useful.

On a separate note though, our average joint income is similar to yours at about £55k gross, and we have a current mortgage of £129k and are thinking of moving and increasing it to £150k, so your plan definitely seems affordable and I'm sure any lender would be happy to deal with you if your credit score is good.

I'm sure once you clear your current debts and you buy your house, you can factor in a bit extra for new gear for the house. That's what we did when we first bought.