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Agreed overdraft - does it need clearing before applying for a mortgage?

Me and my girlfriend are moving home in June to save for a house. We think we'll be able to save £12k in 12 months and are also lucky enough that my parents will contribute £12k in that time as well. £24k will be enough for a deposit for where we're looking at the moment so we hope to be ready to buy by July 2012

We have no credit debts other than student loans (not sure how much is left on it tbh) but we both have agreed overdrafts that we live in of a combined £3000. So if we were to try and clear that it would take us an extra 3 months during which time house prices and interest rates may begin to rise

So my questions is would it be ok to continue to live in our overdrafts while we raise this deposit (putting money into our joint account every month), or will this not be acceptable to a lender?

I know ideally we would be overdraft free but the cost of paying it off (£3000 plus 3 months) is much higher than the cost of living in it(say £360 interest over 12 months)

Comments

  • madmish00
    madmish00 Posts: 315 Forumite
    I seriously doubt any lender will give you a mortgage if you are living in your overdraft for day to day spending.
  • closed wrote: »
    You are going to have to pay it off sometime, when you have got your own place the interest charge is going to be a drain you can do without.

    This may be true but I am hoping to be finish my accountancy exams by December 2012 so would be looking at a substantial pay rise. Big 'if' though I know
  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
    10,000 Posts Combo Breaker
    in general living in an OD every month is seen as living above your means or that you are a poor money manager
    the mortgage company will in any event take account of any debts when deciding the affordability of your mortgage
  • jonny_power
    jonny_power Posts: 270 Forumite
    Plus banks have a knack of calling in the overdraft when you least expect it, especially if they get a whiff of you saving your money elsewhere. clear your overdraft first!
  • sherrybaby
    sherrybaby Posts: 18 Forumite
    It will depend on how close the margins of affordability are. For example, if your deposit is low and you're trying to borrow the maximum then it will come into play and probably go against you. However with a good deposit and sensible borrowing you'll more than likely be fine. Your best bet is to have a chat with a good broker.
  • hcb42
    hcb42 Posts: 5,962 Forumite
    take the three months and clear it. That is one heck of an overdraft otherwise.
  • Ok thanks guys. I suppose I'll just clear the overdrafts and then in June 2012 will look at the situation, and speak to a broker about whether we can use the overdrafts then. At least that way we'll have a year or so of healthy bank statements in our favour
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