clear debt vs deposit

njbates5

Hi! Can I have some advise please?


Myself and my husband have recently sold our part buy, part rent flat last year and came away with enough money for a small deposit to buy a house in the future for our growing family. We are currently living with my father while we continue to save but want to buy a three bedroom house as soon as possible (preferably by summer next year).


We would like to buy a property in the region of £230,000-250,000. We have about £20,000 for a deposit at the moment (not much, I know!) but we also have about £23,000 of debt between us. Is it better to pay off as much debt as possible, or try and apply for a mortgage with a bigger deposit? If we clear most of our debt, we could probably rustle up about 5% deposit. At the moment, we could manage 10% with a bit more saving.


Also, we have a toddler. We currently pay out £780 per month in childcare costs and I know this will significantly go against us when applying for a mortgage. Would it be better to wait until our child turns three when his childcare costs should drop by about a third?


Sorry about all the questions, hope anyone out there can help!

lee111s

Here's some advice.


The more debt you have going into a house purchase, the harder getting a mortgage will be and the harder life will become paying both a mortgage and trying to clear debts.


In reality, you don't have £20000 of savings, you have £3000 of debts.


I would suggest paying off the debts and buying a house with a clean slate.


How do you envisage "rustling" up a 5% deposit when you will still have £3k of debt outstanding even if you use your "savings" to clear it?

Thrugelmir

Settle your debts and start rebuilding your finances. Debts of that level would raise concerns. The sooner you wipe the slate clean the better.