move credit card debt to loan to increase chance of mortgage??

kingstreet

Why not enter your details in a lender's online affordability calculator with and without the relevant debt and see how affordability is affected?

I've given up trying to estimate how borrowing will be affected because these calculations are now far more unpredictable than they were previously.

I entered a £354 car finance commitment the other day and the output didn't change. This is probably because of an LTI cap due to loan to value.

semivia22

AnotherJoe wrote: »

No you don't. You borrowed it on credit cards and a loan and are fooling yourself to think you saved it.

Funny response and in fact very untrue, I bought a car and got Married as well as supporting a family member with expensive surgery using credit cards and loan so please don't jump to conclusions. I would happily say if that was the case as in some ways that may have actually been a good idea!

csgohan4

semivia22 wrote: »

Funny response and in fact very untrue, I bought a car and got Married as well as supporting a family member with expensive surgery using credit cards and loan so please don't jump to conclusions. I would happily say if that was the case as in some ways that may have actually been a good idea!

Debt or loan what ever you want to call it will affect your affordability for future credit application, especially that level of debt.


However it is your choice to get into debt and hence your credit file will not be as good and you will reap what you sow.


I doubt your family member will pay you back as family and money shouldn't mix. If you got ill would they really pay you to get better? There is something called the NHS which is free.


Or maybe invest in private health insurance if your feeling frivolous.


Generally don't spend what you don't have, or beyond your means, that's how people get into trouble.

adindas

minimike2 wrote: »

Not quite right (the first part).
For example, £20k on credit cards could be seen as a £600 outgoing, however structured onto a loan over 5 years at 3.4% would be an outgoing of £362.47, thus freeing up £237.53 for affordability.

I just wonder ...
Does the system actually check it in this detail way or just see it as 20k debt ?

Where did they get info about how long the loan will last do they really ask when people apply for a mortgage ?

How do they include the risk factor if people get the debt in longer term (e.g people are more likely to loose their job in a longer term) ?

AnotherJoe

semivia22 wrote: »

Funny response and in fact very untrue, I bought a car and got Married as well as supporting a family member with expensive surgery using credit cards and loan so please don't jump to conclusions. I would happily say if that was the case as in some ways that may have actually been a good idea!

The reasons are irrelevant amd are not meant as a personal criticism, it's just a fact. What you have ended up doing is obtaining your "savings" , eg the money you now see in a bank account, via a loan and 0% credit card deals.

Without those, you would have spent that money you now have marked as "savings", on a car, a wedding and helping a family member with medical costs. You borrowed that money. The fact you then accumulated some more money but didn't pay back the loans means that practically speaking you are borrowing those savings. It's maths not morality.

Money owed zero, money in bank £37k, savings = £37k
Money owed £37k, money in bank £37k, savings = zero

Many lenders will see it the same way. Otherwise look how easy it would be to go from a five per cent house deposit to a ten percent, or a ten percent to a twenty percent. Just stooze some on credit cards, "hey look I've saved up a much bigger deposit now".

minimike2

adindas wrote: »

I just wonder ...
Does the system actually check it in this detail way or just see it as 20k debt ?

Where did they get info about how long the loan will last do they really ask when people apply for a mortgage ?

How do they include the risk factor if people get the debt in longer term (e.g people are more likely to loose their job in a longer term) ?

Yes - Lenders systems are intelligent enough (it's actually quite simple) to determine from the credit search.

Those that don't automate and rely on humans can of course see from the credit report what is revolving and what is fixed term.

xnoxxnox

It is all down to affordability calculation, estimation of outgoings vs income, and how mortgage payments work into that. I have highish balances on credit cards, yet I also have "savings" to cover those if the credit card company demands immediate repayment. My mortgage deposit were actual (net) savings above what I needed to cover the credit card balances. The problem of high credit card balances is that mortgage lenders assume interest due on those, and minimum down-payment of something like 5% of the balance - this is because a mishap on credit card (missed payment, an odd purchase on the otherwise 0% balance card) can quite easily result in interest being charged (this is how the credit card products make money for the issuer.... cause clearly they don't make money from 0% rates). There is another concern with high credit card balances - proof of deposit, to show that it did n't come from a 20k money transfer off an MBNA credit card... that would look on paper as a 100% LTV mortgage that are not allowed anymore.

Harper123

semivia22 wrote: »

Funny response and in fact very untrue, I bought a car and got Married as well as supporting a family member with expensive surgery using credit cards and loan so please don't jump to conclusions. I would happily say if that was the case as in some ways that may have actually been a good idea!

If I use my credit card to pay for everything in my day to day life I can 'save' £2000 a month. And £24,000 a year. Except they're not savings because I would have £24,000 'saved' and £24,000 in debt.

This is exactly what you have done. Don't fool yourself. Your deposit isn't savings.

adindas

xnoxxnox wrote: »

It is all down to affordability calculation, estimation of outgoings vs income, and how mortgage payments work into that. I have highish balances on credit cards, yet I also have "savings" to cover those if the credit card company demands immediate repayment. My mortgage deposit were actual (net) savings above what I needed to cover the credit card balances. The problem of high credit card balances is that mortgage lenders assume interest due on those, and minimum down-payment of something like 5% of the balance - this is because a mishap on credit card (missed payment, an odd purchase on the otherwise 0% balance card) can quite easily result in interest being charged (this is how the credit card products make money for the issuer.... cause clearly they don't make money from 0% rates). There is another concern with high credit card balances - proof of deposit, to show that it did n't come from a 20k money transfer off an MBNA credit card... that would look on paper as a 100% LTV mortgage that are not allowed anymore.

I think it is down to the bank and their IT system. If my memory serves well only a few banks ask this info during the application to open a mortgage, credit card, current account and majority do not. This information is not available in CRAs so they will need to ask a specific question for this if they want to know about this info.

Is there any plausible explanation why the Banks IT system of most Banks do not ask this important feature, do not check the existing saving when people apply for current A/C, mortgage, credit card.