FTB with debt

TB1987

Hi all,

Looking for some advice please. Me and my partner have a joint income of £43,000 and we are hoping to buy my boyfriends parents house from them next October, we have been renting it from them for the last 4 years as they moved away. They are now looking to move abroad in Oct 2015 and would like to sell it to us as we wanted it.

We have been a little silly with credit cards over the last couple of years and by the time we come to buy it, we would have around £10,000 (no more then this) outstanding on cards. My BF's parents have agreed to sell us the house for £100,000 and we have a £20,000 deposit. We pay £400 off credit cards monthly and after our rent and all bills, petrol, commuting etc we still have £1300 a month left. Thanks to a £20,000 deposit and buying a lower priced house, I have used some calculators online and found that we could get a mortgage for £450-£500 which is what we pay his parents monthly anyway in rent.

Therefore, with the amount we have left over a month even after paying much more then the minimum payment on our outstanding debt - do you think we would get a £80,000 mortgage? Or will we have problems because of the outstanding debt?

Thanks so much for any advice you can offer :-)

enginesuck

If you have a 20K deposit pay off the Credit Cards ! Then build up your deposit with what you would have paid the Card companies.

TB1987

Sorry to confuse - we are saving for the deposit now and would have that level of debt when we got to October 2015 - so we are saving for a deposit and paying off debt at the same time but won't have that level of deposit until that time.

Thrugelmir

£10k of unsecured debt is a sizable amount from a lenders
perspective.

Okydoky25

If you have £1300 a month after bills are you proposing that this is what you are using to start saving for the deposit? I would be using this to pay off the cards and then save after this. 10% deposit is doable without your debt

enginesuck

I'd go for paying off the cards as well, although it may seem your deposit is not building, you are doing yourself a massive favour. :T

Kirstyb1987

Definitely pay off the credit cards!!!!

TB1987

Thanks for your help all - we are paying off our debt as fast as we can and will most likely have £8,000 when we come to buy the house. I was just hoping that even with paying £500 off a month off the cards and still having £1300+ left a month, the affordability would be seen by the lender as our mortgage will be what we pay in rent anyway.

coffeepaul

I got declined or a mortgage with debt, other factors probably as well but im thinking between a choice of a lower deposit but 0 debt compared to a higher deposit but debt on loan and cc's I think its better paying of all your debt and then applying, jmo though.

Thrugelmir

TB1987 wrote: »

the affordability would be seen by the lender as our mortgage will be what we pay in rent anyway.

More to an application than just affordability. The lender is assessing you as potential borrowers. Your credit history reveals much about you and your attitude to money.

Yorkie1

If you pay the cards off now, you are no longer paying a silly rate of interest on them (presuming they are not on 0% deals), so your available funds to build up savings again will be higher.

Trying to save at (e.g.) 2% AER when you are paying out 15-30% AER on the same amount, means you are actually continuing to make a loss.