Paying off debt - which is best?

englishroseana

Hi everyone!

I have put together a budget for myself to pay off my debts, before looking to buy a house with my partner (we do have a deposit tied up in another property at the moment).

I want to clear my debts before we apply for a mortgage and, looking at my budget, I will be able to do this by May next year. However, I was wondering if anyone could help? I have a bank loan, as well as a credit card, with the same bank. Will it make a difference as to which one I pay off first in terms of the mortgage providers looking favourably on my application? Would the loan look better as having paid it off early, or would it be better to get rid of the credit card first? The interest rates etc are all fairly similar.

Any help would be greatly appreciated!

worriedwilf

Hi

I am no x expert but I don't think it will make a huge difference. when you apply they will take into account your monthly debt commitments when calculating how much they will lend you. Lets say that they will lend you £200,000 based on your income but you pay £300 towards a loan, they will know £3600 of the amount they will lend you.

If all of your debt has gone when you apply for the mortgage then I don't think it will make any difference.

All the best