Self employed with credit card debt

Moonraker71

I'm self-employed, hoping to move house, and have an appointment with my existing lender (Woolwich) next week for a further discussion. (Have had initial chat but needed to get another year's tax return done which is being prepared as I write).

I'm looking to port my existing mortgage and get some extra borrowing. My question is this: I've been told I can get 4 x net profit, which in theory means I should be able to borrow about £134k (net profit is £33.5k). However, I also have a credit card debt of £5k. Am I right in thinking this is taken directly off my net profit, meaning they will base their decision on a figure of £28.5k instead - meaning the amount I can borrow goes down to £114k?

I *could* pay this CC debt off beforehand, but it would wipe out my self-employed 'buffer' savings leaving me vulnerable if I had a quiet period at work. I would prefer to pay it off out of the proceeds of my sale. Would this work, or would they still view it as an outstanding debt? Not sure what to do for the best.

Thanks in advance for any opinions/advice.

kingstreet

No. You are not right in thinking that.

Lenders take a set percentage of the credit card balance, perhaps 3% or 5%, off your income.

The worst scenario on a £5k card is 5%, or £250 per month, deducted from your income. On a 4x income multiple, you'll lose £12,000 off your borrowing power.

If you note the card balance "will be repaid on, or before completion", on the application, it will not be deducted from your income/affordability levels.

Moonraker71

Ok thanks Kingstreet. I thought it seemed particularly mean, must have completely misunderstood.