Reducing debt before mortgage application

Cropstar

I'm looking to apply for a mortgage in the next 6-12 months with my fiancee.


Currently I have around £16k unsecured debt, a loan where I repay £281/month on which I owe around £7k and around £9k on a 0% credit card, where the minimum repayment is 1% (but I currently repay around 2-3%/month). My fiancee has no debt and I'm currently paying down around £500/month across both the loan and credit card.


Is it worth doing a balance transfer on the outstanding loan at some point onto the credit card, closing the loan and reducing my minimum monthly outgoings for the purposes of the mortgage application? I've played around with one or two mortgage calculators online and whilst they ask for loan repayments, the only ask for the outstanding balance on credit cards. What do mortgage providers normally assume the credit card repayment levels to be?



If I transferred it would all be on an MBNA card which has a minimum repayment of 1% (e.g. so my minimum repayments would drop from around £370 at present to £160). Would it help with an application?

kingstreet

Cropstar wrote: »

What do mortgage providers normally assume the credit card repayment levels to be?

Usually 3% or 5%.

dimbo61

You are about to take on the biggest debt of your life with £16,000 of unsecured debt in the background.
You want to reduce the payments you make each month so you end up paying Nothing off the outstanding debt !OH sorry £160 a month so 87 years to pay it off at 0percent APR.
However when your Interest free deal finishes on the credit card and you can't shift this debt to another credit card company you could end up paying 18/19 or even 29 percent APR.
Pay off as much of this debt as you can asap

Thrugelmir

Cropstar wrote: »

Is it worth doing a balance transfer on the outstanding loan at some point onto the credit card, closing the loan and reducing my minimum monthly outgoings for the purposes of the mortgage application?

However you massage the figures. The debt ultimately needs to be repaid. That should be your primary objective. Lenders can view the constant juggling and rescheduling of debt from the data available from the CRA's. Including promotional balance transfers.

Lauralou79

If you can you need to reduce the level of debts. Lenders can take that debt amount into account and reduce how much they will lend you due to other credit commitments. It doesn't matter if you are paying less monthly, they'll look at the bigger picture. Plus applications for more credit on your credit file before a mortgage application won't be good.

csgohan4

OP If your unable to manage your budget at the moment, do you think you can manage your largest debt which is the house. ???


Do you know how much a new roof or new boiler can cost? no more running to the LL to get them to fix things because you are responsible for repairs

theone999

csgohan4 wrote: »

OP If your unable to manage your budget at the moment, do you think you can manage your largest debt which is the house. ???


Do you know how much a new roof or new boiler can cost? no more running to the LL to get them to fix things because you are responsible for repairs

who says if you own the house, you have to fix the roof or boiler. why not put something like a tarp over your roof weighted down at opposite sides of the house. or simply not fix the boiler?

MortgageMamma

16k of debt may not be that bad. We don't actually know what the OP's income is, how much they wish to borrow for the mortgage and what % of debt repayment is to income level. We've no idea if they have children, how much deposit saved, what they have spare after expenses every month etc. No need to be so damning about 16k of debt. In an ideal world it would be paid off completely before getting a mortgage - but in the time that takes house prices could have increased further making the purchase even more difficult to achieve.

What I am saying is it may not be crucial to pay off the debt first, or even the right thing to do. What the OP needs is a full affordability assessment NOW and THEN advice on what to do with the debts.

csgohan4

theone999 wrote: »

who says if you own the house, you have to fix the roof or boiler. why not put something like a tarp over your roof weighted down at opposite sides of the house. or simply not fix the boiler?

So why buy a house then? Why not live in a tent, NO boiler needed and a roof over your head and cheaper


Would you not fix a boiler/roof for your parents for their house?

theone999

csgohan4 wrote: »

So why buy a house then? Why not live in a tent, NO boiler needed and a roof over your head and cheaper


Would you not fix a boiler/roof for your parents for their house?

You try living in a tent on land that you don't own.

And yes, I have squatted before. I also used to live for free subletting a few years ago. But circumstances changed and I had to pay rent for the last couple of years which I'm not happy about. I'm trying to save up now to buy the cheapest crap shack so as not to enrich the rentiers further. It's better to live in a house with a hole in the roof with no hot water as long as you're not paying rent.

sanmarco1910

that's a very interesting answer - I am in a similar position - I can pay off all of my credit card debt now but then only have £10k for a deposit or I can roll the debt on (at 0% apr) and have £5k left but a deposit of £15k - I cant decide which is the better?