What kind of debt is best to have before remortgage application?

Finchyboy

Hi, my wife and I intend to remortgage our home and release some of the equity so we can build an extension to the house. Before we do so, we're looking at our current debt which will obviously be taken into account during the application.
I personally have around 7k in credit card debt and about £1500 overdraft. I've transferred the CC balance to an interest free card with Santander and am paying £300 p/m to clear it off.
Yesterday i was offered a loan of 10k with Natwest over 5 years (repaying total of £10,800) that would require monthly payments of £180 which is less than what i'm paying now to the CC and would clear all my debt.
I'm sure there may be other (better) loan offers out there if i look too but it's not a bad offer.
Either way, it boils down to this question - when it comes to our remortgage application, what debt is best to have? The credit card and overdraft? or the loan? Is there a difference to how they will assess it?
If anyone knows i would greatly appreciate some advice

Cheers

[Deleted User]

Generally lenders will take 3% of any credit card debt as a monthly cost. And if on a loan they will take the monthly contracted payment. So for mortgage purposes a loan is probably better for affordability calclators

Jump to a few lenders online calculators and play with the numbers and you should see it lending more for a loan than a credit card.

Depending on your incomes though it might not make a difference. I had a case last week where putting 10k of credit card debt didnt change the loan amount at all. Some lenders have higher tolerances for debt than others.

[Deleted User]

I wouldn't swap your interest free debt to one that charges interest. And if you do, definitely don't lower your payments from the current £300.

Get out of your OD as that could be withdrawn at any time.

MortgageMamma

Work out what you can do now mortgage wise before you commit to changing the type of borrowing. You can only really do that if you have an affordability calculation done with several lenders. Brokers have a piece of software that calculates affordability with multiple lenders at once and its very useful for an indication of what you could borrow from specific lenders.

If you do this to include the amount you need for your home improvements and factor in your current debt levels it should help you work out what NOT to do before your mortgage application.

MartinCate

Hello,

First time posting on here so not sure if i'm doing it right!

My home is valued at £170k and my mortgage is £75k, I have a tesco loan of £13k and am currently £3k OD and need to clear the lot. Anyone have any idea as to whether I should apply to remortgage or go through equity release? The debt is mainly through new boiler and doing my home, plus a bad year of losing family members, expenses for funeral etc.

Any help appreciated.

Thank you.

getmore4less

MartinCate wrote: »

Hello,

First time posting on here so not sure if i'm doing it right!

My home is valued at £170k and my mortgage is £75k, I have a tesco loan of £13k and am currently £3k OD and need to clear the lot. Anyone have any idea as to whether I should apply to remortgage or go through equity release? The debt is mainly through new boiler and doing my home, plus a bad year of losing family members, expenses for funeral etc.

Any help appreciated.

Thank you.

Not really a mortgage question.

better place to post is here.