Unsecured debts & mortgage application

PP1984

Hi all,

I'm starting to look at buying our first home.

Gross salary is £50k pa, with about 5k of hourly pay on top.

We have about £45k available for deposit, but it's coming from a third party, when we are ready to bite the bullet.

However, I also have quite a bit of unsecured debt. £5k on a loan with repayments of £150 per month. But also about £15k on credit cards. This fluctuates a lot, but generally is coming down.

So, I've been on some online affordability calculators. What I'm seeing is that for personal loans, the important factor is the monthly repayment amount. For credit cards, it's the outstanding balances, which seems to drastically affect the amount I could potentially borrow.

So I'm thinking of taking out another loan to consolidate the credit card balances. It would increase my monthly loan commitments to £250 per month, but would really reduce the credit card balances. In a couple of months I could get the total below £3k.

I have a strong credit history. Checkmyfile says a score of 865. I'm confident that I would get the consolidation loan, but is this the way forward? I would be hoping to apply for a mortgage in a couple of months, and would it be damaging to have a recent credit application?

Any advice much appreciated.

amnblog

The smart move will be to get those debts down before you consider a purchase.

Thrugelmir

PP1984 wrote: »

I have a strong credit history.

With £20k of accumulated debt. Your credit history paints a different picture to any perspective lender. A large gifted deposit does little to instill confidence either at this juncture.

PP1984

The 45k isn't a gift deposit. It is the balance of my inheritance, which is owed to me. We agreed that this would be paid to me when I needed it to buy a house.

When I say I've got a strong credit history, I mean that I've never missed a payment etc.
£20k is high, but it was more than £30k last year.
I have about £15k of extra credit available, so I am presently on around 60% usage.

We are also self-employed in addition to my full-time employment, but we don't use an accountant or have certified accounts, so will not be relying on it with a mortgage application.

I will work on reducing the debt further, before purchasing. It is coming down by about £1500 per month at the moment.

Thrugelmir

PP1984 wrote: »

The 45k isn't a gift deposit. It is the balance of my inheritance, which is owed to me. We agreed that this would be paid to me when I needed it to buy a house.

It's not "saved" monies by yourself. Lenders like to see financial discipline. Those that demonstrate the ability to save. Manage their money better. Making payments on time is a bare minimum requirement. There's no additional brownie points for doing so.

PP1984

Thanks. I'll get the debt reduced further. At what level of unsecured debt would you suggest is a good time to go ahead?

lee111s

As low as possible.