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First time buyer mortgage advice
TerryTorque
Posts: 235 Forumite
Now then me and the wife are keen on getting our own place but first appreciate we need to clear as much debt as possible. I have a credit card with about 3.5k interest free for next 15 months and a loan that has over 4 years left at 127 a month Inc interest.
Am I better clearing either of these first? Obviously the loan first makes better financial sense but do we have any less chance of being accepted for a mortgage if we apply with credit card debt rather than loan debt?
I am inclined to try and get the card cleared first despite not being charged interest, simply on the basis that i think I'd stand a better chance of getting a mortgage with the loan debt than a credit card I'd only been paying the minimum on due to putting all efforts into clearing the loan.
Hope this makes sense and appreciate any advice. Thanks in advance.
Am I better clearing either of these first? Obviously the loan first makes better financial sense but do we have any less chance of being accepted for a mortgage if we apply with credit card debt rather than loan debt?
I am inclined to try and get the card cleared first despite not being charged interest, simply on the basis that i think I'd stand a better chance of getting a mortgage with the loan debt than a credit card I'd only been paying the minimum on due to putting all efforts into clearing the loan.
Hope this makes sense and appreciate any advice. Thanks in advance.
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Comments
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The trouble with the loan debt is that the monthly repayments will reduce your affordability by MORE than the debt outstanding. If the lender is looking at monthly affordability, then the card debt cause less issues. Obviously, you will need a deposit - it is madness to have a deposit all saved up and a heap of debt not cleared.Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam0
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Thanks for your reply. Appreciate either will affect affordability and as you say it is madness to have deposit saved up and be in debt. Just not sure I can wait that long to get out of debt and get a deposit together.0
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But as DVS says, you'll be offered less than you could afford without the debt so it doesn't really make sense to say you're not sure you can wait that long. Clear the debt, save a deposit, then buy.
If say you have £10k of debt, they might decide to knock £15k+ off what they'll lend you. See the maths? Doesn't really make sense not to pay it off as you'll be able to borrow less. If you only want a small mortgage and not the max, that'd be a different story. Still might affect if they lend to you though... we don't know your credit history or income, if your wife works, if you have kids, so hard to give an opinion.
Jx2024 wins: *must start comping again!*0
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