Mortgage app with outstanding debts - how much of an issue

Vyncenze

Hi

I posted a related question earlier, but now hoping for a bit of clarification on the effect of my outstanding unsecured debts on a mortgage application.

I earn £34k per year, my partner earns £40k.

Our only debt is mine - I owe £9k on a credit card. It would probably sound less bad if it was a loan, but the rate on the credit card was better (5% lifetime). I pay it off at the moment at just over the minimum 1% per month, because all our spare money has gone into saving for a deposit.

We are looking to buy a property for about £225k, so looking for a £200k mortgage with a 10% (or so) deposit.

I want to apply for the Britannia sharetobuy scheme, which would give us a discount rate of 3.79%, far better than anything else I can find.

How much impact will my credit card debt have on our application? Our credit reports are otherwise clean, no missed payments, various closed credit agreements over time, and we both hold other cards with zero-balances. My partner is currently paying a mortgage - we're sold her flat so it will be paid off by/at application.

I'm planning to do this without a broker because I'm hoping I don't need one. Can anyone advise if our numbers looks ok, or are we going to have issues?

Anything I can clarify please ask

Joe

(PS - I know the best advice would be to pay the card off first, but that would mean x months living with family or renting, which I hope to avoid. By my reckoning, our income of £4.5k per month should allow us to easily afford mortgage (£1100ish) plus credit card payments?)

kingstreet

A lender will take the monthly cost of the card off your income for borrowing purposes. They normally use 3% as the minimum.

£9k = £270 per month x 12 = £3,240.

In borrowing terms, that means about £12k off your borrowing power. With joint incomes of £74k and a mortgage of around 2.7x that, the card debt shouldn't be a problem.

Just get it paid off as quickly as you can. Not for mortgage reasons but because it makes sense.

Vyncenze

Thank you - that is reassuring. It won't affect my credit score too much then?

evanowen

Some lenders are more strict than others.

You can get some idea of how much you can borrow online, try NatWest or Halifax for a good guide.

Income multiples are OK but some lenders look at affordability.

Vyncenze

Every affordability calc I've tried days the numbers are fine (in fact with a lot to spare). But I know getting past the credit checks can be a lot tougher.

Thrugelmir

At 90% LTV , your level of credit card debt may impact the lenders decision. In that £25k saved vs £9k credit card debt = high % of deposit borrowed.

Vyncenze

Thrugelmir - I have noticed you make this comment about borrowed deposit on a number of threads. I take your point, but surely lots of people have credit agreements of one form or another - car loans, hp, student loans etc etc. Do lenders really see all of these as if you were "borrowing" a deposit?

Wh05apk

Vyncenze wrote: »

Thrugelmir - I have noticed you make this comment about borrowed deposit on a number of threads. I take your point, but surely lots of people have credit agreements of one form or another - car loans, hp, student loans etc etc. Do lenders really see all of these as if you were "borrowing" a deposit?

No, don't worry, Thrugelmir is "old school" and regards all debt as a mortal sin, provided it is in proportion and all payments are up to date you should be fine.

Vyncenze

Again, many thanks. That is reassuring.