Debt and Mortgage Application

Thrugelmir

ronny147 wrote: »

But the fact we have the debt now affects how much bank can lend even though it will not be relevant when new mortgage starts

Lenders will look at your credit history as well when processing your application. Not a question of just wiping the slate clean. As in effect you are just rolling the debt over into the new property. In the process extending the repayment period.

HCM

When you declare your credit commitments you will be asked whether or not you will repay any of these on or before completion. The source of repayment will also be requested to which going by what you're saying should be answered as "proceeds of sale".

A lot of lenders may add this in to the mortgage offer as a condition. Something of which your solicitor will check when completing the mortgage.

However, not all lenders do it this way. Some lenders base affordability checks on the worst case scenario, ie how much you can afford without repaying your debts at all. If this amount is within a certain percentage of your requested loan amount underwriters have discretion to go with it provided it is marginal.

Also, going by what you're saying, sounds like most or all of the debt you plan to repay is credit card debt. As far as affordability checking goes, most lenders will take into account between 3-5% of the total card balances as a "monthly payment".

ronny147

Thanks all for the constructive feedback. We may delay a couple of months and pay debt off first