Soon to be House Owner

debmw

We are looking to buy a property in the next 12 months and we have our eye on one that is due to be released later in the year. Our dilemma is that we have £14,000 on credit cards (2), a loan and 1 x HP agreement. Affording them is not a problem and the cards are on 0% for the next 25 months. We are paying them off in large chunks at the moment, but it is affecting our day - to - day living because we are paying so much off them.

Would a mortgage company look more favourably on us if we were to consolidate the lot into a single loan, or do we just leave it be and chip away at it as we are?

Looking at our finances and with what we are currently paying off, the cards will complete by Jan 2017, the loan Sept 2017 and the HP in Feb 2018. The HP could be cleared quicker once the cards are paid off. Between them we pay out £1400 per month just to try and get the debt down as fast as possible. By consolidating, this could be reduced to about £300 a month with a 5 year £14k loan and we can then save over £1000 per month to go towards the house.

We don't have a deposit but as its a new property we are going to take advantage of the Help to buy scheme and we are using the armed forces help to buy scheme also.

Any thoughts would be gratefully received....

Ebe_Scrooge

Consolidation loans are rarely a good idea, and in the circumstances you describe will make little if any difference. A lender will still look at your total outstanding debt.


You say your cards are on 0% ? Then it would be madness to transfer them to an interest-charging loan, you're going to be worse off overall. It may make more sense to only pay the minimum to the cards each month, pay as much as possible to the debt with the highest APR ( assuming you can make overpayments with no penalty ). Once the interest-bearing debts are gone, you should then be able to clear the cards in short order.


Obviously you'll need to do a bit of a budget and work out how long it'll take - the last thing you want is to be unable to clear the cards when the 0% deal ends, otherwise you'll end up paying a whole heap of interest. But in principle, yes, tackle the most expensive debts first and leave the 0% till last, as long as the figures and timelines add up.