Whats better less debt or bigger deposit?

jimmy_boy81

Hi all


Just a quick query - im in the process of selling my flat - ive had issues with the lease which means im taking a bit of a hit on the sale fee.


What I wanted to know was when it comes to applying for a mortgage what is looked upon more favourably by lenders? Less debt for one applicant or a bigger deposit? My credit and store card debts amount to around £14,500 - with some of my profit I can clear around £11000 and would leave me say £20k for a deposit. House values are were looking at is around £240,000ish


Thanks

pjcox2005

Unless the cards are 0% then I'd expect you'd be better paying off the debt.


Mortgage companies tend to share the same view but you would be dropping under a 10% deposit which restricts options.

ACG

It depends on your situation and the lender.
For example, if affordability is fine but credit is shakey, then I would say bigger deposit and more debt. If affordability is fine and credit is fine, then it just comes down to preference and overall cost.

I suppose it also depends if you are able to get the rate down on the mortgage by putting down a bigger deposit or not.

You really need to do the figures or speak to a broker and get them to do it.

AnotherJoe

When i went through it with Santander (so this is just one data point) AFAICS it made no difference, they just offset outstanding loan against the borrowing so it came to the same thing.

However since loans are likely to be at a far worse rate than mortgage I would sugegst you concentrate on reducing loans.

Dave_Pierce

At one financially low point in my life, I was accepted for my first Mortgage with 9k of credit card debt and a formal overdraft of 1k, which was used up!

I feel that as long as you can demonstrate that you are managing the debt it should be fine, after all the Mortgage will be bigger than all the other debts!