To pay off or leave?

Tuareg

I have £5000 outstanding on a 0% credit card deal. The 0% runs out in September.

I'm looking to get my first mortgage in around April/May.

I will have fully paid off the deal before the end of the 0% offer period but was wondering
1) is it better to pay it off as quickly as possible i.e maximising pay back each month

OR

2) Pay minimum each month and keep the cash in an interest bearing account till the end and pay off in one go?

2 was my plan but not sure how this effect my mortgage application which is my TOP PRIORITY.
Thanks

YorkshireBoy

Ideally you'd apply for the mortgage with a zero balance, or just a month's worth of purchases, on the card (as you no doubt know).


However, do bear in mind that CRA information can be up to 2-3 months out of date, so with an April/May mortgage application pending, getting it paid off ASAP should be your priority.

Tuareg

O.K so paying it off ASAP will be my goal.

When I looked at what was involved in a mortgage application I saw that they also wanted to see some bank statements. Do you or anyone know what the best way of dealing with this is?

Should I be close (but never below) a £0 balance or should I keep say £500 in there at the cost of the Credit card balance?

planteria

interesting response YB. a reasonable amount of credit card debt may not cause a problem. and if lenders make a 'human' decision, then they can take account of the debt being at 0%, showing that Tuareg is a wise borrower.

YorkshireBoy

planteria wrote: »

interesting response YB. a reasonable amount of credit card debt may not cause a problem. and if lenders make a 'human' decision, then they can take account of the debt being at 0%, showing that Tuareg is a wise borrower.

I wasn't generalising (which you may be doing?). My response addressed 2 key points in the OP, namely...


1. "I'm looking to get my first mortgage in around April/May.", and


2. "my mortgage application which is my TOP PRIORITY."

dotdash79

The balance will reduce the amount you are allowed to borrow, most lenders will say you need pay 3% to 5% off the outstanding balance per month then times that by 12 and take it away from your income.

So if affordability is tight it might be best to pay it off.

Tuareg

O.K thanks just to clear things up the balance currently owed is £5000 but I've already been saving towards paying this off. I'm not 100% sure how much till I tot up all the christmas/sales spending but I will have at least £1500 towards paying it off.
By the time I come to apply for the mortgage I will have saved/paid off around £3500/£4000. My current savings towards the flat deposit and buying costs are around 50% more than the minimum I need so could divert some of it to clear the CC balance in full.

I'd rather stick as much into the deposit as this will reduce my monthly mortgage costs but NOT at the expense of not getting a loan due to Cc debt. Was hoping I could keep as much CC debt as possible as its at 0%.

Does anyone know what a reasonable level of CC debt ( the only debt I have) a lender will accept?

vics199

When I got my mortgage I was told when I applied that I could only get it if I paid off my credit cards which my dad kindly did and then I paid him back over time. However, I also had a hire purchase for my car at the time which I paid £250 a month to. It all also depends on your income, credit history etc etc so guess there isn't really one straight forward answer to your question.

I would personally pay it all off before applying for a mortgage. Your credit history will still be there for the bank to see and having paid off borrowed money will obviously look good.