Mortgage & Debt Advice

kezh88

Hi,
My wife & I are hoping to be in a position to buy a house soon.
I have £5000 bonus from work which I am looking to use towards a deposit or clearing off debt whichever is the better option and I’m after everyone’s advice as to the best steps to take.

4 years ago I had a lot of trouble with debt and defaults were placed on my record (they expire in November 2017). I still have approximately £7000 debt and I'm currently snowballing £200 per month extra on top of minimum payments.
I am now earning £30,000 per year, we rent a house for £525 per month and have 2 children (one is 3, the other is 2 months!)
My parents are in a position to help towards a mortgage, either as a guarantor or they have offered to join me in the mortgage until we’ve accrued some equity and can take them off.

Do we:
1. Pay off debt, using the £5000 bonus and extra per month, clearing the debt by November 2016 and then save from scratch. This would then take us to January 2018 approximately to have saved a deposit.
2. Use the £5000 and save our rental period expires (large sum of debt and default still remain) and take my parents up on the offer of joining/guarantor us on a mortgage January 2017.

I am not entirely sure how credit searches for mortgages work, my credit score is very poor; is this mainly due to the default and will it be strong once this has been wiped out?
Also, if we take option 2 are we able to get a mortgage using the 5% deposit route?

I kind of feel that I want to get on the mortgage ladder sooner rather than later, as the money I’m paying in rent is just dead money.

Any advice/help would be greatfully appreciated!

Thrugelmir

Clear the debt first. Though keep some accessible money back as emergency savings. Once the debt is settled. Open a HTB ISA for both you and your partner. While your credit rating continues to improve.