mortgage with credit cards

sparklecity

Hello,

I’m currently privately renting, and saving to hopefully buy early next year on a 5% mortgage.

My question is, when applying for a mortgage, where do you stand in terms of credit cards? Currently I’m using about 50% of my credit limit. (0% credit card, so I’m not paying anything) as I had a problem with my car, and didn’t want to dip into my savings to pay for it. Will this affect me getting a mortgage, should I be concentrating on paying credit card off first before saving, or is it possible to get a mortgage with money on credit cards?

My plan was to go speak to a mortgage adviser later this year, when I’m closer to saving the amount I need. But thought I would ask on here for some advice.

Thanks

kingstreet

5% of the balance will be used in affordability calculations to reduce the amount you can borrow.

Rollinghills

Will positive balance improve the affordability calculation?

kingstreet

No. What you're asking is if having savings means you can borrow more and no, it doesn't.

Whether your savings are in an ISA, current account or are a credit balance on a card makes no difference...

Rollinghills

thanks it makes sense just wanted to double check

sparklecity

Thanks for the replies.

Would having money on a credit card put anyone off giving somebody a mortgage? Or is this a pretty standard thing?

I just started to worry, as read on here a lot that people were paying credit cards off before applying for mortgages, and that will take me bit longer than I planned.

kingstreet

It is usually necessary only to indicate that a credit commitment will be repaid on or before completion, not to pay it off before you apply.

In that way, most lenders will ignore its impact on affordability.

A little well-conducted credit is a positive. Loads of maxed out cards and a loan or two are the opposite and can be harmful.

TBH much of it is common sense and not the media-whipped micro-management frenzy we saw last year when people were actually talking about eating only beans for three months...

sparklecity

Thank you. Can I just double check, these figures below are approximates.

I earn 26k, and hoping to buy a house for approx 100k, with a £5000 (5%) deposit. I have a £6000 credit limit on credit card, currently using £3000 of it.

Are you saying if I was to apply for the mortgage now, they would add on 5% of the £3000, and take this off what I could borrow?

Thanks

kingstreet

No. What I said was they will take 5% of the balance, ie £150 and deduct that from what you can afford to pay for a mortgage each month, reducing the amount you can borrow.

You would need to enter your details in your chosen lender's affordability calculator to establish what is and isn't possible, or have your broker do it for you.

As an example, one leading lender indicates £117,000 maximum, over 30 years on the HTB - MG scheme, assuming no dependents, no childcare, no other credit, no student loans, no season ticket loan, nor ground rent & service charges.

Thrugelmir

sparklecity wrote: »

I earn 26k, and hoping to buy a house for approx 100k, with a £5000 (5%) deposit. I have a £6000 credit limit on credit card, currently using £3000 of it.

To be honest it looks as if your finances are extremely tight. Wouldn't take much to tip you over the edge financially. As in reality you've only £2k saved.

sparklecity

This was an example based on my circumstances right now. I'm not expecting to buy for another year, so will be able to get credit card down more by the time I want to buy. I'm hoping to have saved more than 5% deposit too. If it takes me a bit longer so be it, I'll get there.