Sell house, clear debt with some of the equity, buy new house.

PowerClean

Hi All,

I'm looking for some advice and I am going to try and be as descriptive as possible.

My recently married wife and I are looking for a fresh start so the general idea is -

1. Look at brand new house (Strata).
2. Sell House. £185,000 on the market now.
3. Clear ALL current debt.
4. Mortgage Application with Strata independent adviser.
5. Move in December.

Now, part 1 & 2 are already well underway, the issue is that we are worried that the banks won't take into account the future clearing of our debt when we apply for the new mortgage (our deposit is also coming from the sale of our house).

Our equity at sale will be - £65000 roughly. We also have savings of £20000 accessible in November (ISA) and our current debt stands as below -

HP Car - £6000
Overdraft - £5000
Loan - £4600
Credit Card - £8000

A total of - £23,600

We are then left with £41,400 equity, we then need -

5% Deposit (Help to Buy) - £13,500
Additional extra's for property - £8,200
Stamp Duty - £3,200
Solicitors Fee - £1,600

We then have £16,900 equity... Moving house is not cheap!!!! :rotfl:

Do you think if we were called early to start the mortgage application the bank would allow the above explanation and give us a GOOD decision in principal?

Once these debts are clear our monthly outgoings will average around £900 including bills and a smaller food budget (because I eat way too much...)

Our Credit scores are Excellent according to Experian and both our wages are clearing the very resent overdraft (we took this overdraft to pay for some of the wedding so it was only from last month, three months bank statements will show this).

Please let me know if I have missed anything out or anything else I need to consider. :T

Sprintblue

i don't think you should ask on here for advise.

You look like you have a very good plan and a way out of your expensive debt.

I think you should visit a Mortgage adviser and plan from there. Whatever is said on here may not turnout out to be reality.

The bottom line this is your only question:-

the issue is that we are worried that the banks won't take into account the future clearing of our debt when we apply for the new mortgage (our deposit is also coming from the sale of our house).

I think your plan will work, good luck.

Pixie5740

Whether your plan would work depends a lot on how you came you have a £23.6k of debt in the first place and what steps you and your wife are taking to ensure that you don't wind up in the same position again. If you don't tackle the root cause of your debt then you could find yourselves back at Square 1 a few years down the line.

Thrugelmir

As Pixie says the primary concern that an underwriter might have have is whether you'll do this again. As in effect you are consolidating debt and burning equity to move house. Resulting in an even bigger mortgage in the process. Your broker is best placed to find a lender that's agreeable to your plans. Lenders see a raft of data in relation to your credit history so can detect trends etc very easily.

JP1978

This is actually something that we want to do, different figures but same principle.

Have £6k in overdraft and CC debt and two car loans - one is due in a year and one in 30 months but would be able to afford to keep them on, just want to clear the overdrafts and use some equity for the costs of house moving.

Our balance on our mortgage is £41k and we reckon its worth >£81k, so hopefully around £40k equity.