Advice on CC's before applying for a morgages

fezz

Hi Guys,

We are looking to buy the house we're renting, between both of us we have about £7k in credit cards. I could clear these in about 6 months in our current state but I would rather put the money into a mortgage as our landlord is looking to sell the house.

Question is: Is it better to pay off the credit cards then get a mortgage with no deposit or is it better to have a 5/6k deposit but stil have the credit cards?

Advice appreciated....

liz09

that's the exact same situation we were in. Expected to wait another 6-12months to buy but then the house we rent came up for sale. We had more debt than you but decided to go for it. We moved all our debt to 0% credit cards with at least 9 months on them. We managed to scrape a 5% deposit together through a 5k gift from parents and a big handily timed bonus!

We've chosen to go interest free and intend to stay on that until we've paid our debts off which should be between 1 and 2 years. Then we'll either start an investment vehicle or switch to repayment.

7k debt really isn't that much so I'd go for it assuming the interest only repayment is around the same as your rent. Assuming your credit record's ok you should get a 100% mortgage no problem.

Good luck

millsy1980

It is better to pay any debt off because a) it is one less outgoing and b) you stop paying further interest on it.

One factor to consider though is that 100% mortgages tend to be more expensive than those where a deposit is required.

However Northern Rock, for example, are a lender that ignore credit card debt so do not class it as a deductable outgoing therefore it should not impact on your borrowing potential.

fezz

Thanks!

I didnt know that about Northern Rock.... thats good to bear in mind