Applying for mortgage...Should we close unused credit accounts?

delirious

Hi all.

My wife and I currently live in a house that is mortgaged in my name only. We want to sell up and buy something more expensive in both our names.

Current mortgage is £55,000 (90% LTV).

The sort of house we're hoping to buy is going to be in the region of £200,000 and we're hoping to have a minimum of £50,000 deposit, so we really want to give ourselves the absolute best chance of getting a mortgage approved.

Our current joint income is £38,000.

We currently have numerous credit accounts (credit cards, catalogs, etc), alot of which we have one each as we had them before we met, so in fact, we may have (for example) 2 x Capital One Credit Cards, etc.

All of our credit is going to be paid off within the next month, with the exception of Hire Purchase on a car, so my question is, given the above information, will it be enough to just pay off all our credit accounts, or would it improve our chances of being approved if we were to close them all as well?

We will obviously go through an IFA for the application process when we start the process but just want to do as much prep work as possible.

Dave_Ham

It depends upon the credit available to you, although almost certainly will not cause you an issue. Best you ensure credit reference agencies have updated when settled.

Your case will be tight depending on how chunky the monthly HP is, so almost certainly require some research or engage a broker.

All the best

delirious

Dave_Ham wrote: »

It depends upon the credit available to you, although almost certainly will not cause you an issue. Best you ensure credit reference agencies have updated when settled.

Your case will be tight depending on how chunky the monthly HP is, so almost certainly require some research or engage a broker.

All the best

Thanks Dave. The total credit available to both of us is approx £16,000 with a total balance of around £13,000 currently used (which will be paid off in January).

The HP on the car is £225 per month. We could pay the car off as well and reduce the deposit to £45,000, (the outstanding balance on the car is just over £8,500 but we could make up the difference), if it will drastically improve our chances).

Dave_Ham

Do not take this decision until you have sat down with someone, as in some instances it will be better to repay the HP and others not.

Ensure the credit shows as repaid on credit files, or advise broker that you have had the credit and is now repaid as can be keyed onto lender.

Chances are you will be ok, unless you are 50-55 upwards at which point term may restrict your income multiples.

All the best

delirious

Dave_Ham wrote: »

Do not take this decision until you have sat down with someone, as in some instances it will be better to repay the HP and others not.

Ensure the credit shows as repaid on credit files, or advise broker that you have had the credit and is now repaid as can be keyed onto lender.

Chances are you will be ok, unless you are 50-55 upwards at which point term may restrict your income multiples.

All the best

Thanks Dave, what's a typical income multiplier? I'm 29 and my wife is 22.

We're looking at putting our house on the market in early January and will gauge the interest. We're anticipating starting the buying process around February.

When I bought our current house, we took both our credit reports to an IFA and my report was awful to be honest (lingering defaults, one of which showed as unsatisfied, etc) so I do have every faith in the IFA we used and will definitely use her again.

We have worked incredibly hard to improve our credit reports - no defaults on there at all, have a couple of missed payments more than 6 months ago (one mine and one my wifes), so hopefully with a big deposit, we'll be a much simpler case

Dave_Ham

It depends entirely upon the lender of choice, but will not be more than 5.5 times netting off ongoing financial commitments and dependents. Term will clearly not be an issue for you.

Sit down with your broker in advance and run through the numbers specifically.

Best of luck

delirious

Dave_Ham wrote: »

It depends entirely upon the lender of choice, but will not be more than 5.5 times netting off ongoing financial commitments and dependents. Term will clearly not be an issue for you.

Sit down with your broker in advance and run through the numbers specifically.

Best of luck

Thanks Dave, I have emailed our IFA to make an appointment with her for early January so we can work out where we stand

If anyone can offer any further advice on what we should do in the meantime to improve our chances, this would be much appreciated.

Thrugelmir

My suggestion is always only to keep open credit lines that you actually use. As presents a far better picture. Particularly if there have been issues in the past.

delirious

Thrugelmir wrote: »

My suggestion is always only to keep open credit lines that you actually use. As presents a far better picture. Particularly if there have been issues in the past.

Thanks. Is there a specific number of credit accounts that is considered acceptable?

Thrugelmir

delirious wrote: »

Thanks. Is there a specific number of credit accounts that is considered acceptable?

Let's turn the question around. As a lender my question would be to you why do you need so many facilities available?

delirious

Thrugelmir wrote: »

Let's turn the question around. As a lender my question would be to you why do you need so many facilities available?

That's why I'm asking that question...I don't want the lender to ask me that question so would rather close down any accounts to avoid them asking