Overdraft and re-mortgage

payingitoff

Hello,
I wonder if anybody could help please?
We are due to come out of a fixed rate mortgage on 31st October this year.
We are dealing with our debts and don't miss any payments. However, we do not have savings and dip into our overdraft each month before pay day - then its cleared again. I would say we use abiut £3-400 overdraft each month and then go back in the black. This has happened every month for years - (the overdraft is 'free' with the account.

Our home is worth about £130K and o/standing mortgage currently £75k.

My question is - will being in and out the overdraft make a difference when we want to re-mortgage?

If so I will make this my priority debt over the coming months and try and break the overdraft habit.

thanks

ch3101

Will you not need money for fees to switch mortgage?

payingitoff

probably - which is what i will use my yearly bonus for (on target for full bonus yippee) sadly don't get that until september so doesn't help now but will be very useful for change of mortgage date

sharp910sh

You dipping in and out of your overdraft will make a difference, your credit report will show that every month you dip in and out of your overdraft and will not look good to the mortgage provider.

Thrugelmir

payingitoff wrote: »

My question is - will being in and out the overdraft make a difference when we want to re-mortgage?

In principle yes. As to a new lender you'll obviously be in financial trouble at the slightest distress. Overdraft usage shows that you don't manage your money very well.

jamesd

Check your credit report to see if it is shown there. If it is, you should make it a priority to clear it. There are a few non-default things that are seen as signs of potential financial trouble:

1. Use of payday loans (often taken as a very bad sign and strong do not lend indicator).
2. Use of overdraft facility, particularly regularly.
3. Making only minimum payments on credit cards. A relatively weak indicator that can often be easily dealt with by making a £1 standing order payment a few days before the normal payment due date.

If your debts aren't all on 0% credit cards or other very low cost credit, eliminating those indicators may make it easier for you to get such credit to lower your debt costs.

From_St_Neots

sharp910sh wrote: »

You dipping in and out of your overdraft will make a difference, your credit report will show that every month you dip in and out of your overdraft and will not look good to the mortgage provider.

Is this true, I have two current accounts both with an overdraft limit. I am overdrawn on one of these but all that is shown on my credit report is the overdraft limit and not usage. I guess this information will come from bank statements if the lender asks for these.

The account I usually have the overdraft on didn't even show on my credit report until I upgraded the account.

ValHaller

Thrugelmir wrote: »

In principle yes. As to a new lender you'll obviously be in financial trouble at the slightest distress. Overdraft usage shows that you don't manage your money very well.

Worse than that, the overdraft can be taken away with no notice. So any lender will know that if you live in your overdraft, having it taken away can tip you into an immediate financial crisis.

If you are clearing debt, make the overdraft the first debt to be cleared. This might go against the standard wisdom of highest APR first, but it can prevent a crisis being landed on you.

payingitoff

thanks for all your advice, Overdraft will now be my priority.