Mortgage application - car finance vs credit card

SisterSeph

Hi all,

We had a meeting with a mortgage adviser at Santander (we're locked into a fix with them at the moment and are considering porting the mortgage to a new house to avoid ERC). The only debt we have except the mortgage is car finance. It ends in May 2015, with a total of around £2300 to pay (£331 per month).

The adviser hinted, without saying as much, that it would look better if we moved the car finance to a credit card, so we could get a bigger mortgage. Something to do with the fact that at the moment they see £331 coming out every month, and on a credit card they would consider only the minimum repayment (say, £75) coming out, so our outgoings are far less.

Has anyone come across this, and do you think it's a good idea?

Many thanks,

Lizzie

enthusiasticsaver

Is your income insufficient then for the mortgage you need? I am always suspicious of mortgage advisors suggesting something which is normally not a good idea just to get the total amount borrowed up. Are you going to be able to afford a higher mortgage and surely the interest rate on a credit card will be higher than a car finance package? What are the interest rates on both? Unless you can find a 0% or very low rate deal on a credit card my advice would be check out the position on clearing the loan early and interest rates you paying now on the £2300 and what you could get on a credit card.

SisterSeph

Thanks for your response. Our income is sufficient, yes. I should have put this in the initial post, but I have an offer of 0% interest p.a. on my existing credit card, so it would just be the transfer fee of 1.9% to pay on top. We'd also have to pay around £100 extra to the car finance people to settle early, compared to just letting it run its course.

I too am suspicious, so I wanted to gather opinions first. It's possible that we could get the amount we need without taking this "advice", but that depends on how much we can get for our current house. I am nervous about having credit card debt again, I must admit.

amnblog

Get yourself some advice outside of Santander.

Paully232000

Forgetting what the mortgage adviser said, on working it out would you save money by changing to a CC, and still clearing the debt by the same time (if not earlier).

SisterSeph

Hi Paully - no, we wouldn't save any money. It's all about how we look on paper to Santander in terms of what they think we can afford.

L