Overdraft vs Consolidation Loan Payments

Charmson93

Currently me and my wife are looking to become first time buyers and have checked affordability statements for houses based on our incomes and eligibility to receive a 20% equity loan from the government. I currently have a large amount of Overdraft to pay off but whilst trying to save for a deposit this will not be practical to pay off.

Would it be better for me to take out a loan to help increase my 'available credit' and pay off our credit card balance of £1200 and put the rest towards our deposit but subsequently increase our monthly outgoings? When factored into the soft affordability checks would reduce the amount we could borrow but would still allow us to afford the property. We would be looking to take out the mortgage in the next 4-6 months.

Any light shined on this would be appreciated.

kingstreet

Affordability is affected by;-

a) the monthly payment on a loan
or
b) 5%* of the balance of an overdraft or credit card.

Enter the data in the lender affordability calculators and see the difference.

*Some use 3% but 5% will keep more lenders in your pool.

You also need to factor-in 3% of the equity loan in affordability.