Pay off vehicle & have less deposit

coynek

Hi,
I am am saving for a deposit at the moment but have a van on Finance,

I'm wondering if I am better off paying that off if possible and going into a Mortgage with less deposit but no debt?

Thanks

middleclassbutpoor

Debt reduces your borrowing capacity but without figures, it would be difficult to say whether you need to do this.

kingstreet

Option One;-

if you have the affordability, keep the finance.

The bigger deposit means a lower loan to value and a better mortgage rate.

Paying mortgage and finance in the future.

Option Two;-

Repay the finance to improve the affordability.

Get a bigger mortgage but at a higher rate.

Paying only the mortgage in the future.

Conclusion;-

You need to work out the best option for you, based on your circumstances. Consult an independent broker to look at "what ifs" as we do this all the time...

meow5678

Hi coynek,

I had this exact dilemma. I asked our mortgage advisor (through Which?) what he recommended, he did some calculations and confirmed that in reality paying off the debt (mine is £4k) would not significantly change the potential mortgage figure - we agreed the money was worth more to me as a deposit.

Hope this helps!