Investment options , Higher Deposit or Debt Clearance

Bulla

I wonder if anyone could advise on the following.

Our home is due to go on the market and we expect to sell for approx 250k.

Current Mortgage is approx 130k.

After sale we should have approx 117k.

We are moving into rented accommodation for at least 6 months and as such will be looking to squirrel the money somewhere safe. Current thinking is 80k worth of bonds with the rest in Cash ISA's.

We have been paying down old credit card debt for the last 5 years with no new spending and it stands at approx 15k between us.

We will be looking to buy somewhere in about 6-12 months time and I'm wondering if it would be better to use 15k of the house sale to clear off the existing debt or keep that money for a higher deposit when the time comes for a mortgage?

The debt is all on long term 0% deals and we are about 50-60% of potential borrowing on the cards. My concern is that a mortgage lender wont care about a 0% deal and just see this as debt thereby limiting our borrowing potential for a new home.

Any advice greatly appreciated.

Paully232000

Someone will correct me if i am wrong, but I am sure i read here that most mortgage companies take 5% of the balance as a outgoing when taking into consideration a mortgage affordability.
So there is £750/month taken into consideration of your monthly income.
Depends on what you earn as well of course.

dimbo61

Please clear the debt asap.
You will still have over £100,000 deposit and add £750 a month to that ( credit card monthly payments)
That is a 25% deposit on a £400K property or 40% deposit on a £250K property

Thrugelmir

Bulla wrote: »

We have been paying down old credit card debt for the last 5 years with no new spending and it stands at approx 15k between us.

My initial reaction is clear the debt. As you maybe applying to these very same lenders for a mortgage. 0% deals may end one day.

kingstreet

Paully232000 wrote: »

Someone will correct me if i am wrong, but I am sure i read here that most mortgage companies take 5% of the balance as a outgoing when taking into consideration a mortgage affordability.
So there is £750/month taken into consideration of your monthly income.
Depends on what you earn as well of course.

You aren't wrong. Many lenders will deduct the equivalent of £750 a month from affordability and that could see £75k to £100k lopped off your borrowing power as a result.

As an example, Halifax will lend £150,000 to someone earning £30k a year over 25 years. With that level of card debt, the max loan falls to £63,140.

Bulla

Thanks all. The common consensus seems to clear the debt ! I have to say it would be nice to be debt free ! I had assumed that having a bigger deposit to lay down would be best and enable us to buy a better home but if they are taking as much as 5% on the existing debt against borrowing then it would seem not !

Thanks for all the help.