Saving a deposit for first time mortgage

leeruddecology

Hi I'm making my way to saving for a mortgage deposit. I've got about 12k now, but i have a 5k balance on an interest free credit card. This deal ends in May 2016. I think I might be in a position to buy a house towards the end of 2016.

After speaking to friends I have had mixed opinions. Do I look at using the 12k and what ever else I save over the next year or do I pay off the credit card.

I understand the CC debt affects my affordability and credit rating.

The house will be around the 130-140 mark. Any suggestions on paying of CC and being truly debt free or keeping that 5k in CC as long as possible in 0% deals

ACG

It will depend on affordability.

If your income is enough to support the mortgage and the credit card you have the choice. If your income is enough to support the mortgage only then the decision is probably made for you.

There is no exact science as it depends on the lender but I remember once I seen someone have a credit card with a similar balance and it reduced how much they could lend by over £20k (4 times the balance of the credit card!) but the flip side to that is I have seen people with £3-4k balances and the amount they can lend reduce by around £2k.

I think I would do what suits until closer to the time and see where you are 2-3 months before applying.

leeruddecology

Cheers for the reply.

My job pays me 27.5k ATM and I do work freelance and that let's say to be conservative is a further 7k before tax. So not in big money but I am climbing the ladder of which I'm only a 3years or so in.

I assume proving freelance is tricky and to be honest I base all my financial decisions on my main job.

So perhaps the 5k will have a reasonable affect on my affordability.

leeruddecology

With the above in mind one of my friends said I should try and get a mortgage now with the 5k credit card and use the 12k for a deposit.

ACG

File your self assesments and you will have 2 years accounts by the time you apply. That should help affordability with or without the credit card.

If you apply now I think the affordability will be a little too tight with the credit card.

Have a messa round on some affordability calculators.

leeruddecology

Hmm thanks ACG

I actually have self assessment records for past three years and one for a couple of years back was around 11k before tax. Im paying that tax bill via by PAYE at the moment. Costs about 170£ p/m on my tax code.

My freelance monies are in my main bank account where I receive my salary, expenses and spend money etc.

What evidence do I need for the SA income? Just the SA alone and the bank statements?

looknohands

I gave my broker SAs for 3 years, had to order hard copies as the HMrC site didn't have the right docs, took two weeks. I also gave broker my current years accounts so far as a projection, I use one bank account for everything also, gave broker statements for this account.