Getting into good financial position for mortgage

Lou2011

Hello,

I'm looking for some advice regarding me and my husband's financial position and how we should structure our finances to be able to get a mortgage in the next year or so. We both have substantial debts but have been reducing these significantly in the last couple of years. We are now unsure of whether to continue paying off debts or with my income, whether we should instead start saving a deposit.

Here is a brief SOA:

Me:
Credit Card debt £31k
Loan £1.4k
Student Loan £2.4k

Income £62k basic, plus annual bonus of approx £14k

Husband:
CC debt £12k
Student Loan £14k

Income £26k (min. OH is self employed and avg earnings last 3 months were £3.5k/month)

I'm not sure if my husband's income will be considered in the mortgage as he is recently self employed.

Our CC debt was much higher and we have been paying off as much as we can. We started with OH CCs as they were higher interest rates.

I'm looking for advice on the following options:
1) continue paying off OH CC debt (£12k) - leaves me with £31k outstanding on CC, no deposit
2) start paying off my CCs, no deposit
3) leave CCs for now and instead put money into saving a deposit
4) - any other options?

I know we still have some time to go before we can even consider being offered a mortgage, but wondered if having a deposit and a few CCs is better than no CCs with no deposit? We will have about £13k in next 4 months to do one of the above.

Thanks

DVardysShadow

It is crazy to have savings while you have debt. Effectively, your savings are on credit and you are paying interest at your highest rate in order to be able to say you have savings and you are getting interest at a small fraction of that rate on your 'savings'.

Leaving the Student Loans out of it, you have 45k to find before you start saving.

beecher2

Agree - you need to pay off the credit card bills, and then start saving for a deposit. You might need to look at your household budget in order to save more than you first planned - either that or delay your date of buying. Debt Free Wannabee will help you look at your household budget

somethingcorporate

Get rid of those debts!

Use http://www.whatsthecost.com/snowball.aspx to help with your planning.

getmore4less

Agree with the above.

But add you need to have a rough idea what your saving goal is and put that in the debt/savings plan.

You have over £4kpm coming in on £76k total.
OH has £1600pm min + extra

Lets say £6kpm.

you say £13k in 4 months is £3250pm

Thats £2750 outgoings

Do a SOA and cut back everywhere you can.

say you can live £1k+rent that should up the saving maybe closer to £4kpm

£45k paid off in less than a year. £50k deposit a year later.

Since this is going to take at least a year can you cut the rent back by getting a tiny place to live.

theoretica

If there is a chance that the mortgage company will only be looking at your finances you might want to consider paying off your credit cards rather than your OH's first.

Thrugelmir

theoretica wrote: »

If there is a chance that the mortgage company will only be looking at your finances you might want to consider paying off your credit cards rather than your OH's first.

All debt will detected during the credit checking process for a mortgage.

As has been suggested already. Tackle that debt. Make sacrifices for a period of time to get to grips with the situation.