FTB - clear loan or save the extra pennies before AIP/DIP

meow5678

I think I know the answer to this but I'll put it to the learned group...

I've saved my target for my contribution to the deposit.

I have a personal loan (for a car) which I pay off monthly - £323/month, £5.5k remaining. Interest has already been paid up front and included in the installment amount. So I can't save anything paying it off early.

Before we go to discuss an AIP/DIP with a broker/bank etc, should I use the money I was saving (approx £1300/month) to:

• Pay off the loan in total (this would take me about 3 months)
• Put the money aside for furniture/moving costs etc.

I'm not sure whether it will work in my favour to remove this monthly DD (it is the only significant outgoing I have) and therefore increase my disposable income.
Or
Continue paying off the loan for another 17 months as planned and demonstrate that I can pay back and stick to the loan terms (I read that paying loans off early does not have a positive effect on credit history/score etc).

Hope that makes sense!
Thanks

ACG

It will depend on your income and the size of Mortgage you are after.

If your income is £50k and you want a £100k Mortgage it wont be a problem keeping the loan. If your income is £25k and you want a £100k Mortgage it probably will.

meow5678

Thanks ACG,

my income is £45k, my BF's is around £30k (self employed for 2 years).

We have a deposit of £80k (saved + gifted) and want to borrow around £300k (but probably less in reality).
LTV approx 80%?

Just getting into this, so it's all a bit hypothetical at present.

Thanks

ACG

I think there are lenders who will potentially do it, but I think there are also lenders where it may fail affordability.

I would personally say leave it where it is for the time being (assuming that is your preference) and then see what the broker/bank says on the affordability front when the time comes.

GoingOn30

Great work saving such a robust deposit, but your affordability is pushing it if you want to borrow up to 300k.
I would keep the money and save it for now, you can always pay off a chunk if the loan if at mortgage application a lender tells you they would prefer that.