Credit cards

Oliviasmom

Hi, just wondered how lenders generally view credit cards for mortgage applications? I currently owe £2.5k, and intend to with my partner buy a house in the next few months. I have £3.5k in ISA save to buy and partner has about £6k saved?

Is it better to pay the debt? Or have more of a deposit?

stu2500

Use the lending calculators on the lenders websites and that will give you an idea if you need to pay off your credit cards or not. I'm in the process of a mortgage application with Natwest, and used their intermediaries calculator below

https://rbsintermediaries.hdddirectsolutions.co.uk/Natwest

I also have credit card debt which I didn't have to pay off, but we weren't asking to borrow anywhere near our borrowing limit (but it was 95% LTV).

Its obviously better to have less debt, but if you can afford to keep the credit card debt, it might be better to have more deposit. It depends from lender to lender and on their lending multiples I suppose.

Hope this helps.

Thrugelmir

Savings and debt come out of the same bucket as far as lenders are concerned. Not individual pots. With a high LTV this factor becomes increasingly important. As can be viewed as simply borrowing to fund the deposit. Which in essence results in the borrower being potentially financially stretched.

enthusiasticsaver

It will affect the amount they will let you borrow. Some lenders do insist a condition of the mortgage is that debt is paid off but how they check this I don't know as often people will pay it off with sale proceeds from existing property.

Oliviasmom

Thanks for the replies everyone. I'm going to try and reduce it as much as I can before I apply.

Thanks again