Moving home

ollie2001

Evening all

The wife and I are about to move up the property ladder and I just wanted to get some friendly advice.

We're a year in to a £13k 4 year personal loan, so approx 11.5k left (as the interest is added up front, would probably be less if I requested to pay it off early). Is this likely to scare off mortgage lenders?

We also have £700 left on an interest free credit card that I'm chipping away at £200/month so that should be cleared soon. I think I know the answer, but I'm guessing it would be best to wipe that debt before applying for a new mortgage? And cancel the card? Or leave the card active with a zero balance? (3k limit)

We have £3k in savings and approx £30k in equity (£20-23k of that will be a 10% deposit though) plus a disposable joint income of around £1800/month (that's after the current mortgage and all bills paid, just fuel + food not included).

Checked all the credit agencies, we're all clean and current. No late payments, both on electoral role, both have credit cards and no credit searches within the last 6 months (think there's a couple still within the 12 month window though).

Anything else we could do to boost our chances? In a perfect world we'd have 25% deposit, no loans or other debt and have no chain but I just wanted to make sure we're doing everything possible

Thrugelmir

Lenders are stress applicants at nearer 6% - 6.5% interest rates. Rumours abound that the EU may set even higher levels. Current interest rate levels are abnormally low. As the financial crisis recedes. Then rates will return to more normal levels.

If you are serious about moving house. Then you need to decide your priorities in life. Tackling debt levels and saving for example. Sacrificing other things to achieve your goal. The noose is tightening on credit in general. Lax lending by banks is rapidly becoming a thing of the past.

CKhalvashi

As Thrugelmir has just pointed out, stress testing may be the main concern here.

I've just taken a mortgage on a foreign property at 7.9%, which is probably about average for the UK in the long run, but abnormally low for the country of purchase (although I know the rate can't rise above 10.4% for the 15 year term)

Have a play with some calculators (here and here. First is more comprehensive), and see what would happen if the rate was 6% above SVR now (so you'll be looking in the 10% range). It's pretty scary stuff.

CK