Mortgage Advice

buttonmoon

I am thinking about buying a house in the next two years. I know the ideal situation would be to wait 2 years until I have paid off all my debts and saved up a deposit.

However, my long term relationship has just ended therefore I will probably end up staying in the house we are renting for £600 per month. I have looked some mortgages and if I buy I will pay nearly the same as if I was renting. This has lead me think about consolidating my credit cards into a loan and investigating if I can buy a house sooner.

Is it still possible to get a mortgage if you have a loan? Is it better to have a longer loan with smaller repayments (and more disposable income), or a higher payment over a shorter period?

claret_mike

Personally, i would seek to pay as little in rent as possible - pay off your debts and save for the deposit. Can you rent a room somewhere or find a cheaper rent for next 2 years?

You are correct in that the more you pay monthly in debts, the less you can borrow as it affects your affordability. What I would ask you to consider is the amount of interest you will be paying. The longer you hold a debt, the more interest you pay - which is a hidden cost that most people do not consider.

If you can get into the mindset that you are paying unnecessary interest and you should stop this where possible because you are working x amount of hours each day or possibly x amount of days per month just to give to someone else. For example - for every £50k borrowed at 6% APR, you you will repay £96k back over 25 years.

Get yourself over to the debt free wannabe board - get some ideas how to get your current debt repaid more speedily and get yourself into the mindset that when you come to get the mortgage, rather than take it for 25-30 years just because the payments are less, you have got used to having lower outgoings that you will feel more comfortable to take it for 15-20 years and save yourself possibly £20k in interest on every £50k borrowed at 6%APR.

View the next 2 years as a way of getting into the habit of building wealth, not prolonging debt and feeding the banks.

Potential consequences of getting into the habit of consolidating is you never get free of debt and you become reliant on it. For example, if you were to do what you were thinking and you needed new things for the house and you fund this on the never never, you continue as you are and before you know you will be looking to consolidate.

The best advice I can give is, spend 15 minutes looking through the debt free wannabe board and bankruptcy boards to appreciate why having debt should not be taken lightly - it's usually OK at some point but if anything happens to your health, income etc then you see it quickly goes downhill.

You are at a point where you can choose which way you go....Don't be easily attracted to the wanting it now feeling.