Acceptable level of debt when applying.

binaryuniverse

Hi all,
My first time venturing in to this world of the forums.

I'm planning on buying my first home; hopefully towards mid to end of next year but, the longer I leave it, the more I can save for the deposit and other concerns when moving.

Therefore, I am starting to get my plans in place now, so I am ready, or at least in a much better position, by then. Paid my first £4k in to my LISA, at the end of March, and anything else is in high interest accounts/regular savers.

At present I am stoozing, all card debt at 0%, and it's likely I'll have £7k to pay off, come this time next year. However, that's £7k that isn't going towards a deposit, which would very useful.

Is a certain amount of debt acceptable, when applying for a mortgage? Will they see it as extra expense per month, and mean I get lower mortgage offer amounts (at present, on my expected salary I'm getting ballpark figures of £140k. But those are quick calculators. Not proper checks).

My credit history is otherwise spotless. No missed repayments. No defaults. No ARs. Been in my overdraft once in some 3 years.

If it's better to pay it off then so be it.

TIA

darkcloudi

I've got debt of £6200 when I applied, has gone up recently but I doubt it affects much if the affordability is good. Just like yourself the debt is on 0% credit cards.

The mortgage broker suggested to me that I can borrow more then what I am asking for which was good, so I think this is something that the mortgage company may have looked at.

If you are maxing out on what you are able to get from the mortgage company and with the added credit card debt then I believe the mortgage company will reduce what they will offer you by that amount.

Thrugelmir

binaryuniverse wrote: »

At present I am stoozing, all card debt at 0%, and it's likely I'll have £7k to pay off, come this time next year. However, that's £7k that isn't going towards a deposit, which would very useful.

Surely the £7k is part of your deposit?

Filo25

They will take account of your monthly debt repayments in your affordability calculations, unlikely to have any huge impact with the kind of numbers you are talking about unless you are borderline on affordability to start with.

binaryuniverse

Thrugelmir wrote: »

Surely the £7k is part of your deposit?

If I can use it as part of my deposit then that would be great. But if the debt needs to be paid off first, as it affects the amount I can borrow (or mortgage rate) then it won't be.

Thanks for the replies so far.

Nebulous2

binaryuniverse wrote: »

If I can use it as part of my deposit then that would be great. But if the debt needs to be paid off first, as it affects the amount I can borrow (or mortgage rate) then it won't be.

Thanks for the replies so far.

It could do both - in opposite ways.

The debt will almost certainly reduce the amount you can borrow.

Having it as a deposit could reduce your mortgage rate - especially if you go over a threshold eg 15% deposit instead of 10% could trigger a better deal.

I posted recently about my experience with my stooze pot.

Reducing the debt from £30k to £10k increased the amount they were willing to offer by around £100k.

mcpitman

For some assurance, 2 years ago applied for a 95% £120k mortgage as a FTB whilst carrying £10k on a CC @ 0%.


No issues whatsoever, with 3 dependants declared and mortgage in sole name. (mortgage was approx. 2x salary)


From memory Nationwide's maximum lend could have been up to £180k based on a full affordability assessment.


Just for clarity do you currently have £8k in savings and a £7k debt, or was the £7k drawn down from the CC to make £15k savings (and £7k debt).

binaryuniverse

mcpitman wrote: »

Just for clarity do you currently have £8k in savings and a £7k debt, or was the £7k drawn down from the CC to make £15k savings (and £7k debt).

At present it's approx 12k in savings, and 6k debt. By this time next year I could have raised that savings total to close to 20k.
Other credit cards will be paid off in that time, so I'm also making a large effort, over the next 12 months to save harder. So things I usually do, such as nights out and the odd weekend away, are all going to be massively reduced.
Even if I'm not quite where I want to be, next year, I'll be a lot closer than if I didn't do The Squeeze, and in a prime position to buy in 2020.