About to get a mortgage - pay off debt

16hm

Hi.

Situation is that I have sold my house and will in the next few weeks apply for a mortgage (most likely with HSBC).

Will get around 10%+ value from my house with the sale for the new purchase.

I have the following debt on cards:

£1200
£3400
£2100
These are all 0% interest cards.

I have approx £3400 left on a credit union account for a car purchase. This doesn't show on any credit file. (?). This has an 7.8% rate.

Now I have around £1000 saved up which I was going to use for purchases for my new house but after reading horror stories on here about people not getting mortgages I am now considering reducing some of my debt instead.

My credit file is impeccable with ten years history and 6 years with no missed payments. My wife on the other hand has around 6 missed payments over the last 6 years.

My question is which part shall I reduce? Iwant to look an attractive customer for HSBC.

The obvious choice would have been the car loan except my plans were to pay this off on a 0% card after moving.

My other two choices are to pay off a card or to simply add more to the deposit for the new house.

Any ideas?

Thanks.

Thrugelmir

HSBC will take a negative view of any unsecured credit balances. As appears that your deposit is borrowed.

Six late payments won;t score well on their internal system. As in this age of direct debits really no excuse for incurring them.

You may well find HSBC won't be overly receptive to your application.

originalmiscellany

HSBC are probably the most picky lenders out there... So anything negative is a real problem. Who else is there out there other than HSBC?

16hm

So in your opinion is it not worth applying to them?

Clearly I won't be able to get rid of my CC debt in the short term.

Will be signing my wife up to experian etc soon to have a fuller look but neither of has any problems getting any credit.

I cancelled all of my wife's credit lines a couple of months ago and a have had a card under her name for the last year with no missed payments. If it means anything all her missed payments were on catalogues and were over a year ago.

GMS

Lenders will not care about the interest rate of credit card debt. Whether 0% or 30% it will typically be treated as a 3% of the balance per month as a commitment.

6 missed payments will harm credit score. The car loan which you say is not showing on a credit search will still need to be declared. Failing to disclose will be fraud and I assume it shows on your bank statements?

HSBC are very picky as has been said. With a 10% deposit they would want squeaky clean A1 clients. I hope you get through with them but I wouldn't be too optimistic.

For affordability purposes reduce the debt which has the most impact per month on affordabilty.

16hm

Lenders will not care about the interest rate of credit card debt. Whether 0% or 30% it will typically be treated as a 3% of the balance per month as a commitment.

Fair enough I will then pay off some of my debt then. I didnt realise this would be an issue.

Six late payments won;t score well on their internal system. As in this age of direct debits really no excuse for incurring them.

Would it help that the last missed payment was 2 years ago?

Failing to disclose will be fraud and I assume it shows on your bank statements?

No it doesnt appear on statements but does appear on my pay slips which will obviosly show up. I have no desire to commit fraud.

I suppose my main question is will the late payments of 2 years ago (6 in total) have such a detrimental effect as to stop me getting a mortgage with them? I apprecaite that any reply comes with a big caveat.

jamesd

The missed payments are significantly negative. Time passing reduces the negative but it sill looks careless to have done it so much.

With a 25% deposit and low income multiple (less than 1.5) I had no issues with their First Direct arm when I had unsecured borrowing of more than half of the mortgage amount and they also indicated that they would be content for me to have a mortgage of similar with another lender at the same time. But I also had plenty of money and could have purchased without the mortgage if I had to, you are clearly not in such a good position and are also after a far more risky to them proposition at 90% LTV, so you'll probably have a much tougher time.

When you send an application you can include pages with additional information that you want them to consider. That can include an offer to clear cards and/or explain your plans to clear them rapidly so they will have less effect on income.

Do be sure that you are completely honest and open.

No huge harm to try but don't be surprised if the decision is no. You could try phoning them for their initial thoughts before applying.

16hm

Thanks Jamesd. That may be my next course of action. To be honest I never knew my wife had this on her account as I really value my file.

The unsecured debt however is just a consequence of life. University fees and cars snd getting married.

Does it make any difference that they gave me an AIP a fq months back after searching our credit files or is that merely for identification purposes.?

jamesd

An AIP should have had some credit check behind it but it can't have been the full human underwriting that will consider all of the relevant information.

Thrugelmir

16hm wrote: »

The unsecured debt however is just a consequence of life. University fees and cars snd getting married.

Also choice and your decision as to what your priorities were.

Ultimately a mortgage is a financial transaction that's where lenders are coming from. With a shortage of funds to advance. Lenders can pick their customers. In the process setting rules to weed applications out.

16hm

Quote:
Originally Posted by 16hm
The unsecured debt however is just a consequence of life. University fees and cars snd getting married.
Also choice and your decision as to what your priorities were.

Ultimately a mortgage is a financial transaction that's where lenders are coming from. With a shortage of funds to advance. Lenders can pick their customers. In the process setting rules to weed applications out.


Absolutely agree with you. I see no reason to be ashamed of my debt and no where in my post have said that I am entitled to a mortgage so not sure where you are coming?

I actually count myself lucky as I'm still young own a property, have a good salary and a good pension pot. This much better then some other people who are the same age as me.

If it doesn't work out this time then in six years I will have no missed payments on mine or my wife's card.

It really isn't a problem.

And from my humble point of view they would be missing out on my custom as I would simply overpay (like I have been doing for the last 2 years).

No back to the question at hand. Does anyone have any opinions on which unsecured debt to pay off first. Or is it the case that it is lumped in one category?