which will affect my mortgage amount more??

Jones01

Good Evening,

To cut a long story short, I have to remortgage my home in June 2014 as a single applicant instead of a joint application. I'm sailing quite close to the wind on how much the lenders will give me based on my single salary - it would be fine if I didn't have any debts, but I do! I won't be abe to clear all the debt by June 2014 so my question is which will affect the amount I would get on the remortgage application more, the credit card debt or the personal loan? Or will both affect the amount they would give me equally?

I currently have a personal loan of (Gulp) £5,274.50 for which I pay a monthly payment of £164.50. I'm allowed to make overpayments, but if I don't the loan term runs until August 2016.

The credit card debt is currently (big gulp) £5,284.83 spread between 2 cards, both at 0% until September 2014 & October 2015.

By June 2014 I should have been able to save close to £5,000 but should I pay off the credit cards or the loan with this?

Thank you, and I hope someone can give me some advice, because I really need it
xxx

Thrugelmir

Personal loan first. Settle it as soon as you able.

Then direct the repayments into the card expiring September 2014.

How close to the wind are you are sailing? As small factors could tip the balance.

Jones01

Thanks for the reply - I'll need 4.89 x salary to get the remortgage, I've spoken to Barclays who have said they would be willing to lend me 5x salary if I had a strong credit rating and no debts so I'm very worried that I won't get what I need

pjread

Not certain how true, but I seem to recall hearing any loan with less than 12 months left to run is 'ignored' by at least some lenders for affordability calculations.

So while generally I'd agree get rid of the loan, if you can't but can get it to under 12 payments to go that might help...

Also, I *think* they're mostly interested in regular monthly payments to cards, rather than outstanding balances. if you took off the regular payments from your salary, how close to 5x are you, and is your credit file clean (no late payments etc)?

kingstreet

The loan sees £1,974 deducted from your income and the card debt (assuming lender takes 5% of balance) £3,171 so the card debt has a bigger impact on your borrowing power, but you pay less interest.