Credit Card Debt and Mortgage Application

Melvyn

Hoping that somebody knows about this - we are looking to buy our first flat together, it will be a joint purchase so I think both names need to be on the mortgage.

I am now self employed and will only be able to give a years accounts and in any case do not have a regular income due to the nature of my business, so the income to pay the mortgage will come from my partner although I will paying the deposit.

From reading around it seems that we can borrow more from some lenders based on the larger single income of my partner and not including mine at all. If we went on this basis, meaning the affordability element is based on her salary does it matter that I have credit card debt?

I have another year now all at 0% and dont want to have to pay it off unless I have to although I can afford to pay it and the deposit, stamp duty, fees as well.

Does anyone know how lenders will see this? I have been told that the amount of debt reduces the amount lent in the same way as salary increases it for some places.

Thrugelmir

If you are funding the deposit then the lender will expect you to be party to the mortgage application. Irrespective of whether your income is required to meet the affordability requirements of the mortgage. "Borrowed" deposits in any form aren't advisable. As more often or not impact the mortgage application.

From a borrowers view starting the most important purchase of ones life with a debt burden on top of the mortgage. Is taking a huge gamble. Merely increases the risk of things going badly wrong further down the road.

Melvyn

Thankyou. I can see the logic but it isnt hard to show that I have the funds sitting in a bank account to pay it all off. Suppose I am really only minimising real losses at 0% anyway with bank interest so low. What do you mean by borrowed deposit?

If I pay it off how long will it take to clear for the credit check? Does it depend on which card company it is?

Thrugelmir

Melvyn wrote: »

What do you mean by borrowed deposit?

As an example. Deposit £20,000. Credit Card Card debt £10,000.

Some lenders will take the view that you only actually have £10,000 saved.

busybumblebee

I got a mortgage just over 2 years ago with my partner and I had about £3000 of credit card debt at the time and he had none. We were accepted first time and the debt didn't make any diferrence to our borrowing as my monthly payments wouldn't impact on our ability to pay the mortgage and I've never had any missed payments, so still have a very good credit rating.

I don't know how that works with the single salary, but just thought I'd share my own experience.

Melvyn

Thrugelmir wrote: »

As an example. Deposit £20,000. Credit Card Card debt £10,000.

Some lenders will take the view that you only actually have £10,000 saved.

Thankyou. My deposit will be about 10 times the CC debt and I will have about 3 times the amount of the debt left over after buying.

It sounds like its easier just to pay it off for the small benefit of offseting it.

If I pay it all off but it takes time to clear for the credit check will some human input be able to prove the debt isnt actually still there? Not really had anything to do with credit checks so no idea how it works.

StuC75

Whilst you may see it as offsetting, thats not how the bank view it.. as theres nothing to stop you either using the savings for something else, or paying it off and running it back up again..

Thrugelmir

Melvyn wrote: »

If I pay it all off but it takes time to clear for the credit check will some human input be able to prove the debt isnt actually still there? Not really had anything to do with credit checks so no idea how it works.

Lenders can assess your probability of using credit again by looking back of your history of available credit compared to credit history. The credit agencies supply lenders with datasets (of information) that is processed by complex algorithms (computer programmes) to score you.

Compared to just a decade ago. Large lenders credit scoring ability has become far more sophisticated.