What to pay first

New_Guy_2016

Hi All,

Hoping someone can give me some advice on the best way forward as predicting what Mortgage companies are going to rate you on seems impossible.

In summary come March next year we are going to be looking at re-mortgaging our house which will also need to swallow up our 2nd Mortgage. The reason we are waiting until March is due to us being unsuccessful a few months ago to re-mortgage due to some blips on our credit files so our broker advised us to wait another 6 months and we can look again.

However what I am trying to do is put any disposable money we have between now and then to good use in order to increase our chances of getting the the re-mortgage.

Below are our list of what I would call Debts as in just costs we are paying off which are not providing us any benefit anymore. I have also included our total standard Income and Outgoings.

Total Income: £4,329
Total Outgoings(includes monthly payments to debts): £3,740
Disposable: £589

Debts to pay off

Credit Card 1
Limit: 5000
Monthly: 125

Credit Card 2
Limit: 2550
Monthly: 80

Credit Card 3
Limit: 2250
Monthly: 60

Credit Card 4
Limit: 1350
Monthly: 40

Overdraft 1
Limit: 5000
Monthly Charge: 90

Overdraft 2
Limit: 1400
Monthly Charge: 20

Overdraft 3
Limit: 500
Monthly: 10

My logical initial plan is to start with the lowest debt and dump all the disposable on there in one go and this would clear the quantity quicker however may not necessarily hit the highest interest first. Also in terms of debt would credit cards look worse than overdrafts etc.

On top of this the way my wife is paid we have a free monthly wage payment in March of around £2,500 which is totally disposable.

The other option dumping all the disposable into our Mortgage which will bring our LTV down as with the 2nd Mortgage it currently stands at 89% so may get more options if got it down to 85%.

Any more information needed let me know

Any help appreciated

Dorastar

It might be good asking on the mortgage boards too if you haven't already. Are all the credit cards and overdrafts at their limit or are they under? I'm not much use for advice as I wouldn't know what they're looking for but if you total those all up it's a lot of debt. Hope someone can give you better advice.

New_Guy_2016

Most are between 50-100 under their limits at the moment and we are not using them anymore.

Yeah it comes to a lot and one lender refused us due to high unsecured debt so that is why I am trying to make sure any disposable we get goes to the right place.

Will stick it on there too thanks

[Deleted User]

Overdrafts can be withdrawn at any time, so you should probably get rid of those first.

As for the Credit Cards, what are the APRs?

New_Guy_2016

Good point as can be risky however it seems when we were looking at re-mortgaging the overdrafts were never mentioned so was thinking the mortgage places were not as bothered about them.

In terms of paying things off if we get the re-mortgage and it swallows up the 2nd mortgage then initially it will be an extra £400 a month saved so can then really make serious damage into all debt very quickly.

Dorastar

Worth posting a Statement of Affairs or SOA as well if you can then people could give advice on where there might be wriggle room to overpay the debts more

New_Guy_2016

I was going to but have just recently gone through an full overhaul of my finances and we paid a lot of debt off.

So if I look at my Outgoings now everything is bills that have to be paid etc. The only thing that could stop would be my Sky but I have just dialed that down to £56 a month so everything is literally cut to the bone

Dorastar

Fair enough then, hope you get some more advice and can get the mortgage sorted

Sarastro

Mortgage companies use a range of measures so it's difficult to say which is going to be most problematic in their eyes.
Standard advice is tackle the debt in order of highest interest rate first and it's difficult to see how that's wrong.
Have you checked out your credit score? Worth doing.
I would say improving your credit score is probably more important that dropping and LTV band but I'm prepared to be shot for that.

New_Guy_2016

Thanks #Sarastro,

Yeah due to some re-financing we did a month or so ago we managed to get rid of some really high interest debt and close off around 5/6 debts which was great.

It is nice to and logical to get rid of the high interest first but happy to pay off low interest if it meant certain debts the mortgage companies would look at would be gone but as you say it is hard to tell what they would look for.

Suppose my philosophy is going for a Mortgage with a total of say 3 different debts at their limit would look better than say 5 debts but all a good bit under their limit. Although then our availability of credit would look good so that is the flip side.

Yeah we had a look at our credit files and my wifes is very close to the top rating and is good in terms of no missed payments, defaults etc. For me I am currently in the fair bracket as more of the unsecured debts is mine so likely why. Plus I had a stage 5 mark on my file which was incorrect and only managed to get it removed about 3 or so weeks ago so presume it will take a month or 2 to recover. Again on mine I am good in terms of no late payments, defaults etc.