First time buyer - clearing overdraft and saving for deposit

davevade

Hi all,

Myself and my wife are starting to save our deposit for a mortgage. Both of us are overdrawn after getting married and are trying to clear the overdraft before we start saving.

However, we think it would be cheaper and quicker to clear our overdrafts with an offer on our credit card. However, we're worried about our credit rating - would borrowing a large-ish amount on our credit card look bad a few months before applying for a mortgage?
We think it makes good financial sense but are worried potential lenders might see it as a bad thing!

Please help!!

Dave.

Thrugelmir

Where's your deposit coming from? As sounds as if you expect to be buying in the near future.

davevade

Thrugelmir wrote: »

Where's your deposit coming from? As sounds as if you expect to be buying in the near future.

We are saving for it ourselves - hoping to have it together in the summer.

Thrugelmir

davevade wrote: »

We are saving for it ourselves - hoping to have it together in the summer.

Then clear your debts totally first. Learn to live within your means.

davevade

Thrugelmir wrote: »

Then clear your debts totally first. Learn to live within your means.

Thank you for the advice in that respect. I don't think my first message was perhaps that clear - we are aware that we need to clear our debts, what we were wondering was what would be the best manner to do that from a lender's point of view.

When checking our financial history would it be better to see:

1) That we had been overdrawn for a period and gradually paid off the debt
2) That we had used a 0% cash advance on our credit cards to clear our overdrafts and paid a set monthly amount to pay that off.

Our preference is the second of the two because it is cheaper because we avoid overdraft fees, but we are concerned by how it might affect our credit rating when we come to apply for a mortgage in the summer.

Is anyone able to give us constructive advice on what a potential lender would prefer for us to be doing??

Thanks,

Dave.

dimbo61

You would be better reducing the OD every month and clearing this ASAP
Then start building up savings for your deposit.
If you take a cash advance on a credit card you will be hit with fees 3/4% cash advance
Now if you get a 0% CC for normal spending and pay down the OD first and then clear the CC debt asap that might save you a little interest.
Hope you had a great wedding but now its time to repay all debt and save for that dream home

Scottishrob79

If you apply for a credit card, it will be an extra search on your credit history. Whether you pay the OD off with credit card debt or pay it off through spending less, I would do the latter as you have to pay the debt off either way. The credit card will just be extra borrowing that will go against you

We're just about to start looking for houses in the new year. My wife said earlier in the year she wanted me out of my overdraft by August, which I thought was impossible as I'd been about £600 into it regularly for years and I didn't think I spent that much anyway. Putting my mind to it, not only did I get out of it by August, I am now disappointed if I do not have at least £400 in my account every week

NeoVR2k6

Also to add, do not use cash advance on a credit card - this is reported to the CRA's as a separate balance. Not sure lenders would look upon it favorably.

cats2012

I'm sorry but I'm with others here, there is no point having a deposit if you still have big overdrafts. Remember overdrafts can be called in at any time and you need to have the money to pay them. In fact, if your bank were to review and saw you had a mortgage they MIGHT be even more concerned about their money and ask for it back.

You don't say if your OD is interest free, but if it's not the fees/interest will almost certainly be worse than your mortgage interest and even if it is that could change any time.