Ditch the loan - pre mortgage application??

sparkstertom

Hello all - please bear with me!

We're currently in the market for our first home. Between us, we have a good income of £65,000 and this will continue to rise.

She has been very MSE and currently has no debt whatsoever and savings of £20k plus..

I've lived on my own so have built up a little debt - but this is well and truly under control...

The house we're looking at is £249999 and we have a deposit of £25,000 plus savings to cover stamp duty and solicitors - so that's all sorted..

My debt is £7000 at 8% and I pay £281 through payroll each month.. I'm sort of in a position to pay this off with my savings, however, our plan was to use my portion of the savings to pay for a few little home improvements and then start saving for a wedding...

My question is will having this £7000 loan affect the amount we can borrow a fair bit? Should I pay this off and then start saving again? Or should I leave it to run its course??

I've read the article about savings vs debt and I fully agree with it, so by that logic I should pay off my debt... but it's not too much of a stretch..

Any thoughts?

Apologies if that makes no sense!

sparks*:j

kingstreet

The lender will take the monthly loan payments off your income before multiplying it out to see what you can borrow. Use the lender's online affordability calculator to see what impact it has on your borrowing power.

£280 a month is £3,300 off your income, or around £13,000 off your borrowing power at four times income.

If it looks like you won't be able to borrow enough, simply tick the "to be repaid on completion" box on the mortgage application and it won't then be taken into account.

sparkstertom

Hi kingstreet,

Thanks for your quick reply.

We've had a talk - and I think I'll probably pay it off prior to our application. I thought realistically, given the jobs we both have it won't make too much of a difference anyway. However, thinking of it in terms of the numbers, what you've said makes perfect sense!

Thanks!

sparks* :j

kingstreet

In which case, pay it off a couple of months at least before you apply, so it has a chance to be showing on the CRAs records when you do apply.