FTB - Debt / Mortgage Application

toriade

Hi All,

My first post here.

I'm a FTB trying to get my finances sorted before Mortgage Application. I'll be making a joint application with my partner,We are looking to have our target 15k deposit complete in Dec with a view of spending the new year in our own place.

We have a joint income of 75k. She has no debt and should have a good credit rating, only thing she has on credit is monthly phone contract. I, however have some debt and a credit card late payment 3 years ago (Payment requested on a Friday as dd date was on a Sunday)

- A personal loan with £1409 left to pay up - a fixed monthly payment of £137. Around 10months left to pay
- Credit card with a balance of £3500 @ 28.8% APR

Trying to find a way of reducing this to barest mimimum if not all before mortgage application. I'll have a free £2500 next month which I'll like to put towards reducing my debt.

Option 1
Is it advisable to pay the £2.5k on the credit card due to the high interest? This will leave me £1k on the card + £1409 on the personal loan. This would have reduced significantly via monthly payments by December.

Option 2
Pay up the personal loan and direct £1k towards the Credit card. This will leave me £2.5k on the card as the only debt


As we are planing to get a mortgage in December, there are chances my total debt might still be around £00s via Option 1 or £1k+ if I choose Option 2.

Whats the impact of CC late payment in mortgage application?

Should I clear out all my debts before the mortgage application or few hundreds on the credit card at the time of application won't hurt?

As stated above, my partner only has a phone contract on her name, she is on electoral register. Are those enough to build a good credit rating? We've been advised she should get a credit card in her name but I'm against this due to what we've planned for December.

Thanks in advance for your suggestions.

MovingForwards

Personally I would pay the money off the CC as that's a lot of interest you can save payment on.

The loan is fixed Apr so wouldn't concern me.

Get them both paid off asap after paying the chunk off.

Idea - if you have any deposit saved up would your partner be happy you borrowing some of it to pay your debts off? The money can be replaced as you will no longer be paying the debts each month.

The late payment a few years ago so is minimal effect on your mortgage application. And you have a reason for it.

A CC for your partner would be beneficial, it's several months until December and she has time to build up 6 months of responsible borrowing and repayment; only need to buy petrol or food shopping and pay the CC in full when the statement comes out.

Have you both signed up, for free, to check all your credit reports to make sure there is nothing else?

A good whole of market broker will see you in safe hands.

MortgageMamma

I think you should pay the money off the credit card as its higher interest rate

PLUS

There are mortgage lenders who will ignore the secured loan as by December it will have less than 6 months to go. So don't worry about that.

Just to add - the property market is a bit depressed in Nov/Dec/Jan - people don't like uncertainty over the Christmas period, so many take it off market and put it back on in the new year. That said, other sellers will be desperate to sell due to it being "quiet" on viewings etc, so you could bag a bargain.

What I'm saying is don't get frustrated if nothing you like is on the market at that point, it'll bounce back by March