Reduced Debt or Increased Savings for Mortgage Application

julielou2

When applying for a mortgage, will lenders look more favourably on a few thousand pounds more available for a deposit or a few thousand less on our credit cards/loan. We've got 6 months to save before we start looking again for a house to buy and would like to know whether to reduce existing debts or save a pot of money.

I'm aware that normally it's best to clear debts before saving a surplus - does it still apply in this case?

TIA

herbiesjp

A lender will annualise any loan payments/credit card payments that you have outstanding.

So if you pay £200 pm on a loan they will do 12 x £200 = £2400

They will then deduct that from your income before applying their income multiples i.e 3 times or 4 times your income

Persoanlly I would suggest reducing the amount of other debts you have - affordability is very important when it comes to mortgages, and you really do not want anything else to interfere with those mortgage payments