How will my overdraft affect a mortgage application?

kitrat

In a couple of years I will be looking at buying a house and consequently making mortgage applications.

I graduated from university the year before last and have a graduate current account with a £1000 interest free overdraft, later this year that will go down to £500 and the following year to £0.

I have come up with a monthly budget and a savings plan and have been stubbornly putting away the planned ~£600 every month into an ISA for a deposit. However I never seem to be able to stick to my monthly spending budget (it is very tight) which I don't mind as long as I keep up with the savings.

This means I spend a lot of each month in my overdraft (though I am not going deeper into my overdraft, just maintaining a steady negative number). I hadn't thought this was a problem but now I'm not sure. Will this make me look bad and impact on a mortgage application in future? Should I just forgo a months savings and pay off my overdraft once and for all? I will have to do this at some point when it goes down to zero but I wanted to put it off until the last minute!

Sorry for the long post, thanks for any advice.

Dave_Ham

It will make sense to now pay off the overdraft if you are considering a mortgage.

It will not detrimentally affect you being in the overdraft so long as the overdraft is not increasing each month.

Paying off your overdraft will inevitably increase your credit score also...

Good luck

kitrat

Dave_Ham wrote: »

It will make sense to now pay off the overdraft if you are considering a mortgage.

It will not detrimentally affect you being in the overdraft so long as the overdraft is not increasing each month.

Paying off your overdraft will inevitably increase your credit score also...

Good luck

Thanks Dave, will it appear on my credit report then? Or can the lenders view my statements over the years?

I wouldn't apply for a mortgage whilst in my overdraft, but I was wondering if they could view my history?

Dave_Ham

Get your credit reports - good advice in any case, but it will show as a credit allowance of sat £1,000 and that you are using say £400 and be measured monthly on your credit file...

Thrugelmir

kitrat wrote: »

I wouldn't apply for a mortgage whilst in my overdraft, but I was wondering if they could view my history?

Your overdraft history will be accessible to the lender.

The credit scoring system used by the lender may take this into account.

kitrat

Thank you both, I'll be paying off my overdraft this coming payday!