Bigger Deposit or Less Debt?

El_Tedistino

Hello all

I'm trying to get a mortgage arranged for approx £280k - is it more important from the lenders point of view for me to have a bigger deposit saved or less debt (ie car loans, credit cards)?

So, which of these options am I better off being in:

Deposit of £60k and credit card/loan debt of £12k
or
Deposit of £48k and zero credit card/loan debt

Which scenario would I be likely to get a bigger mortgage with?

Thanks in advance for your help

mighty_morley

Hi El Tedistino,

I believe mortgage companies frown on loan debt but turn a blind eye at credit card debt, thats how it was in 2008 anyway before the dip.

Personally I would pay off all debt as this would boost your credit rating and use the £48k as deposit as its almost 20%

El_Tedistino

ok, so you think that clearing the loan and car loan debt is the most important thing to do? We can continue to pay off the 0% interest credit card monthly as we are doing at present, but it won't be clear for a couple of years.

Thanks for your advice

Thrugelmir

El_Tedistino wrote: »

ok, so you think that clearing the loan and car loan debt is the most important thing to do?

Paying a high rate of interest when having savings that could clear the debt is a cardinal sin on MSE.

Wh05apk

I would be careful, look at the deals open to you, if you pay off your loand you will have less than 15% deposit and so will be paying a "lousy" rate on the mortgage - £280k+ with 15% the rate will be dramtically less - your monthly saving on the mortgagewill probably be enough to pay your loan repayments quite easily.

"I believe mortgage companies frown on loan debt but turn a blind eye at credit card debt, thats how it was in 2008 anyway before the dip."

Mighty_morley, where do you get that from????? debt is debt!

Thrugelmir

Wh05apk wrote: »

Mighty_morley, where do you get that from????? debt is debt!

Most likely referring to the now infamous Together Mortgage.

Darth_Mortgage

I'd say the bigger the deposit the better, assuming the debt is easily managable within your budget.

Wh05apk

Darth, you need to get the correct signature, if you are a broker/advisor.