Pay debt or put towards mortgage?

emsywoo123

Good evening and TIA for any help :beer:

I shall bullet point to help me keep down the waffle!!

* I owe approx £15K on credit cards, self managed DMP
* I have been offered settlement on these at approx £11.5K
* I will shortly have a gifted sum of money, to be used towards a house purchase. Will have roughly 60% cash deposit, will need to get a mortgage for the rest.
* Would be I better:
a) paying the £15K in full and clearing debts, but therefore losing some house money or
b) Paying the settlement offer, but presumably that is worse for credit rating?

Clearly by the fact I am on self managed DMP anyway, my credit rating is shot, but no CCJs etc.

Any advice appreciated.

Thrugelmir

Keep in mind that any finance houses you default on, i.e. partially settle. Might not be particularly receptive to a mortgage application. Blantantly obvious you could have settled in full. Though will take time for your credit record to heal. Speak to a broker as it's a lender more specialised in adverse credit mortgages in the shorter term. This in itself will come at a cost, i.e. higher rates of interest.

emsywoo123

Thrugelmir wrote: »

Keep in mind that any finance houses you default on, i.e. partially settle. Might not be particularly receptive to a mortgage application. Blantantly obvious you could have settled in full. Though will take time for your credit record to heal. Speak to a broker as it's a lender more specialised in adverse credit mortgages in the shorter term. This in itself will come at a cost, i.e. higher rates of interest.

Thank you. Most of them have been sold on, there are 4 creditors in total. I would not apply for a mortgage at any of them.

I currently rent, and looking at the numbers, so long as I can secure a mortgage for less than 10%, it will still be far more affordable than rental. I have not sought credit/made any applications/extended my debt for approx 12 months, I just have not been able to find the £15K to clear it.

I do plan to speak to a broker, we have one lined up, it was just whether I should fully clear or partially settle these debts first. If it made no difference, I would partially settle and use the money for the move, but if preferable to pay in full then I will do that.