deposit or pay off debt

liz09

All,

I really can't decide what to do - here's the issue, any help appreciated.

We want to buy the flat we currently rent. We're hoping to get it for 190k. We have 5k of free funds available. I have 6k that I could also use thus making a 5% deposit. However my partner has a load of debt so would it be better to get a 100% mortgage and pay the money off the debt or get a 95% mortgage but still have this debt hanging around. We'd hope to remortgage after 2 years to a better deal once debt free

Any help appreciated.

THanks
Liz

southernscouser

Personally I'd want to be debt free before making any sort of commitment to buying a property!

Would your monthly payments go up? If so there is more temptation to pay less towards the debts!

I don't know if you're familiar with it but have a look at this snowball calculator which will tell you how long it would take to pay of the debts depending on the amount you pay towards them each month!

liz09

the mortgage will cost us £90 a more a month than we're paying in rent. We'd be debt free in two years whether or not we bought a house, but I'm thinking the property prices in Oxford will probably raise enough for us then not to be able to afford anything. It seems a sensible buy, not overstretching us...

southernscouser

I won't lead you up a false alley as I know nothing about the housing market, mortgages or any of that malarky! But from a personal point of view I won't look into getting a mortgage until I'm debt free.

But I'm sure someone with more knowledge will be along soon!

Good luck. :beer:

jamesd

95% will probably get you a better mortgage interest rate so that's useful. The debt probably won't greatly limit the rates you can get, but instead the affordability calculation that decides whether you can get the loan at all. It'll be most significant if your partner is the highest earner by a large amount.

Discuss it with a mortgage broker, since only the specific effects on the affordability of the best deal for your situation will let you decide.

Consider interest only, since that'll free up money to pay off the other debts more quickly.

MortgageMamma

Hi

In an ideal world it would be useful to be debt free. Income multiples/affordability on a 100% mortgage can often be significantly lower, and you are restricting yourself to less products to choose from, higher charges and would no doubt pay more for the mortgage. Why not consolidate partners debt into a loan with the lowest interest possible, and then consider the mortgage - a whole of market mortgage broker should be able to guide you to make the best decision