How bad is my situation?

Hxnnxh

I have three credit cards. One has no debt on it - I transferred it to a interest free card. The other two are barclaycards, one has £1,400 on it and is interest free for another year. The other has £3,800 on it and is no longer interest free.

I am a huge spendaholic so I have now cut the two barclaycards up so I can't use them anymore.

I am paying off £200 a month and that's all I can afford right now. My fiancee and I are saving for a mortgage. He has a good, stable job and between us we earn about £50k.

We are looking to apply for a mortgage in march 2015 and I will not have paid off my credit cards by then.

Will our mortgage application get rejected because of my debt? I have never missed a payment or anything like that and always pay off the minimum.

We are hoping to get a mortgage with nationwide.

Please help!

Thank-you.

exarmydreamer

Hi, You will need to pay off more than the minimum on your cards each month, to show you can handle your money wisely. Start keeping a spending diary which will help you see where you are wasting money and where you can cut back.

Packed lunches, meals in with friends rather than going out and not to many fancy coffee's will see you free up extra money to go towards your debt payments.

Also have a look at what you no longer wear in your wardrobe and sell on line to make some extra payments. We have had to think carefully about what we spend to help purchase a property and the more you can pay off your debt the easier it will be to successfully apply for a mortgage. Good luck

Siamese

Have you tried getting a low interest/interest free balance transfer back to the empty card? It's worth asking, but if they say no just close it. It might look better if that line of credit weren't open to you.

tlc678910

Hi, with the new mortgage affordability focus lenders want to look at your recent bank statements and spending to ensure you have surplus income each month (in order to show you can afford a mortgage and meet your payments if interest rates rise). I know people would generally adjust their spending when it is needed but this is what the banks want now. Expect to explain any occasions where your balance goes down/ does not go up/ looks stretched e.g. money moved from current account to savings or paying for an annual holiday. Mortgage meetings are now about 3 hours long looking at your finances in depth.

To give yourself the best chance it would be a good idea to sit down with your partner and plan how you can arrange your finances and budget so that as well as paying down your cards you have balances on your accounts that grow and are not overdrawn. You need to convince a lender you are managing your money well and can cope if rates rise.

Good luck

sourcrates

tlc678910 wrote: »

Hi, with the new mortgage affordability focus lenders want to look at your recent bank statements and spending to ensure you have surplus income each month (in order to show you can afford a mortgage and meet your payments if interest rates rise). I know people would generally adjust their spending when it is needed but this is what the banks want now. Expect to explain any occasions where your balance goes down/ does not go up/ looks stretched e.g. money moved from current account to savings or paying for an annual holiday. Mortgage meetings are now about 3 hours long looking at your finances in depth.

To give yourself the best chance it would be a good idea to sit down with your partner and plan how you can arrange your finances and budget so that as well as paying down your cards you have balances on your accounts that grow and are not overdrawn. You need to convince a lender you are managing your money well and can cope if rates rise.

Good luck

Wow, 3 hours ??


Begs the question, does anyone ever actually manage there money correctly ?
Seems like a tall order these days.

Pixie5740

You're situation isn't really that bad. Yes you have debt but you are able to service it and haven't missed a payment. Any debt you have will be taken into account when calculating your mortgage affordability.

Certainly closing down any credit cards you no longer use is a good move as it reduces the amount of credit available to you. Paying more than the minimum balance each month also looks good although I would concentrate over paying the debt with the highest interest rate first.

A spending diary is another good tool. I use the YNAB software to track my income and expenditure. I've found it really useful as before I frittered money away and now I am able to save more.

jules888

sourcrates wrote: »

Wow, 3 hours ??


Begs the question, does anyone ever actually manage there money correctly ?
Seems like a tall order these days.

Glad dont have to go through that again getting a mortgage but feel for people who do!

dancingfairy

It is unclear from your post if that is just the amount going towards debts or whether you are also saving for a mortgage. If you are saving for a mortgage you would be better off getting the debts off your file as quickly as possible and then starting to save a deposit.
You will also be saving yourself interest on the debts and can rebuild your credit rating before you get to the point of getting a mortgage.
df

quantic

When we applied for our first mortgage we had about 3k debt, I had actually saved the money up to pay it but the mortgage advisor said to leave it. If it got flagged up he would tell me to pay it and it didn't. Kept the savings until we were settled for a few months then paid it in full.

Also, we just got a new mortgage and they barely looked at our finances at all - I think it depends on the lender and also how much your borrowing. The last time they wanted to know our entire monthly spend to see what we have left (gas, electric, mobile phones, petrol etc).

This time round they barely asked anything, but then again we only borrowed £126k and were "approved" for upto £250k...