Pay off credit card now or not?

FTB-FTW

Hi all

Really quick question which I'm hoping will have a quick answer!

I'm literally about to hit 'send' on our mortgage application (husband and I are FTBs) but can't decide what to do about the paying off credit cards question.

For the record, my husband has no credit cards or loans\overdrafts and I just have the one credit card, so that's the only debt I'm declaring between the two of us. I have an outstanding balance of £900 on that card and am paying off the minimum monthly.

Obviously, if we can afford to move we can afford to pay off that £900, but (a) I wonder if it is actually in our favour to have SOME debt on the application and (b) you know what moving house is like, I'd rather not have to pay anything unless absolutely necessary till after the move and we know the full damage.

Basically, I'd like to not pay it off just yet.

What's the implication of saying on the form that I don't plan to pay it off by completion? Good, bad or totally neutral?

Need to fire this off ASAP so v grateful of help!

sharon1982

Hi there

I was pretty much in the same situation as you! I had one credit card with £1,100 on it, and my boyfriend has no overdrafts, card etc.

I decided to pay it off by completion, as having an outstanding debt does affect your affordability criteria (plus I didn't want to have to worry about an extra bill each month), but since it is a relatively small amount it may not make a difference.

I guess it depends on how close to your affordability you are, and if you are stretching your finances, if that makes sense. I think it also affects the total amount they will lend you slightly. But as far as I know, when they do take it into account, they look at your minimum payments - maybe someone else can confirm this?

FTB-FTW

thanks. We're not stretching hugely, and are actually putting down a lower deposit than we could theoretically afford to ensure a buffer for moving costs - but I'm the lower earner and seeing as this will be coming out of my account (no joint account) it will mean I am potentially struggling when I'm called upon to pay a sudden solicitor's fee, or similar.

It's actually quite a pain for me, I'd really rather not do it. And no I don't want to ask him to do it for me!

sharon1982

When looking at affordability the mortgage company will just look at regular monthly expenses, rather than any one-off costs, and certainly won't take into account house buying costs ie solicitors fees etc. And since it is a joint application, I am pretty sure they look at your salaries as a whole, rather than individually, if that makes sense.

So if you can comfortably afford everything when looking at the two salaries together then you'll probably be fine - you could input your details into a mortgage calculator - once with no credit card debt and see how much they will loan you, and once with your credit card debt and see how much difference it makes. I know a mortgage calculator is theoretical but it will give you an idea...

Hope that helps!

FTB-FTW

Sharon> we're considered pretty low risk in terms of affordability - don't think they're even taking my income into account. And this is the only debt we have!

FTB-FTW

On the other hand, it would be nice to know it's paid off (come to think of it, it'll mean I can let myself use the thing if I get really desperate later on!) Argh, decisions.

sharon1982

Excellent, in that case I doubt it would make a difference then - might as well not commit to paying it off on completion.

jockosjungle

Doubt such a small amount will make much difference to be honest, if you;re not at the very limit of your borrowing for the mortgage I wouldn't worry about it

R

sharon1982

Yeah - you can always pay it off after completion - it shouldnt affect your application, so may as well not commit and then pay it off when you like.

TrickyDicky

quick question - are you paying 0% on the card?
if you're not - why havent you paid it off already?
They're not really interested in how much debt you have (unless it's too much). To count in your favour they just check the payment history, not the balance.

Thrugelmir

FTB-FTW wrote: »

For the record, my husband has no credit cards or loans\overdrafts and I just have the one credit card, so that's the only debt I'm declaring between the two of us. I have an outstanding balance of £900 on that card and am paying off the minimum monthly.

This will be detected and raise questions as to the manner you manage your finances.

Requesting a bigger mortgage but struggling to pay a small credit card balance?

Very simply put it just raises questions in the mind of the underwriter.

I'd rather not have to pay anything unless absolutely necessary till after the move and we know the full damage.

Something you appear to suggest is the case.