Financial Dependants

nimp

Hi, I'm looking at taking out a loan to clear a credit card, and I've been asked if I have any financial dependants. I'm divorced, and have 2 children under the age of 10 who I pay maintenance for, they stay with me every other weekend, but live with their mum. Do I count them as financial dependants if they live with their mum?

Thanks
Nimp

WhenIam64

I pay maintenance for

Yes you have 2 dependents up until the age of 16 or 20 if they take further education.

Are you also sure that a loan is the best way out. Have you done your Statement of Account so you can work out why you needed to use the CC in the first place?

Willing2Learn

nimp wrote: »

... I'm looking at taking out a loan to clear a credit card...

Hi nimp and welcome to the forum

Have you considered a 0% APR balance transfer card? I recommend trying some eligibility checkers...
https://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards/

And as WhenIAm64 has suggested. You really need to determine the cause of your debt so that it doesn't happen again
http://www.stoozing.com/calculator/soa.php

nimp

Thanks for the welcome and quick replies WhenIAm64 and Willing2Learn

I assumed I did have dependants but just wanted to double check.

I am financially stable and the debt is managed (and manageable - its already on a 0% card). I visited a mortgage broker earlier today as I'm looking to buy my first home since splitting, and it became evident that the amount owed on the card greatly reduces the size of the mortgage I'd be eligible for.

If, however I took out a loan to pay off the card, then calculations show that I can borrow more - the impact of another X amount of monthly payments to take into account is a lot less than having the credit card. I understand that I need to be able to afford to pay any loan I would take out, however this would be offset by the savings I would make paying for a mortgage instead of paying for rent!

I'm just looking round at the moment to see what my options are, I am responsible, just looking to make an informed decision

Thanks
Nimp

Willing2Learn

Then I recommend asking your question on the main mortgage board, as a number of brokers are active MSE members. You may get your best answers over there.

nimp

Thanks Willing2Learn!

EssexHebridean

It is feasible to drastically reduce your outgoings for a short time and get the card balance right down before making the application, rather than ending up with this debt costing you more money overall? It feels totally counter intuitive to me to look to increase the amount you will pay to clear the debt, although I do understand why you're considering the course of action. Do you have enough saved as a deposit that you could use some of that to get rid of the debt altogether before taking on more in the form of a mortgage? (Ie is there more than you technically need in your deposit savings so can it stand the hit from taking X amount out to clear the card?)

Allowing that this is your first home purchase since a split, you would ideally be a lot better off not taking any additional debt into it, particularly as the current economic uncertainty could well mean an increase in interest rates before too long.

Smellyonion

nimp wrote: »

Thanks for the welcome and quick replies WhenIAm64 and Willing2Learn

I assumed I did have dependants but just wanted to double check.

I am financially stable and the debt is managed (and manageable - its already on a 0% card). I visited a mortgage broker earlier today as I'm looking to buy my first home since splitting, and it became evident that the amount owed on the card greatly reduces the size of the mortgage I'd be eligible for.

If, however I took out a loan to pay off the card, then calculations show that I can borrow more - the impact of another X amount of monthly payments to take into account is a lot less than having the credit card. I understand that I need to be able to afford to pay any loan I would take out, however this would be offset by the savings I would make paying for a mortgage instead of paying for rent!

I'm just looking round at the moment to see what my options are, I am responsible, just looking to make an informed decision

Thanks
Nimp

That is odd, I thought that all outstanding debt was ducted from the amount that could be borrowed.

WhenIam64

That is odd, I thought that all outstanding debt was ducted from the amount that could be borrowed.

That is what he is trying to do but when calculating affordability/LTV ratios net income is used. Change your net income by paying down debt and the amount increases.

aimeemum

Smellyonion wrote: »

That is odd, I thought that all outstanding debt was ducted from the amount that could be borrowed.

A friend of mine was advised to do the exact same thing earlier this year when applying for a mortgage. She and her husband moved £12k from CCs and other financial obligations into one loan for the same value and that increased their mortgage offer by over £20k. Makes no sense to me but she took the offer.....

The cynic in me is wondering if the loan and the mortgage were offered from the same lender?

WhenIam64

Makes no sense to me but she took the offer.....

If you look at the arithmetic around affordability. Paying 10,000 at and APR of 30% is completely different paying the same 10,000 at an APR of 5% in terms of monthly outgoings / affordability. So by adding in the mortgage debt has gone up but outgoings are the same.

The risk here is that the affordability calculation is somewhat skewed if the CC debt is ongoing spending which has not been curtailed. In the OP's case, his CC debt was a one-off from separation.