Mortgage advice

Sweet_Girl_x

Hello

I wonder if someone could help me or give me the advice on the best person to ask.

Me and my partner would like to buy a house together. It will not be expensive, just a modest 2 bedroom new build house around 200k.

We have worked hard to pay our debts down and also repair our credit rating from 6 ago.

My question is, we initially planned to pay all of our debts to 0 and then save the 5% deposit needed to buy.

But I realised the other day that if I pay the majority of the debts, and have a bill per person of £100 and £200 (£300 in total for both of us) this amount does not affect how much we could borrow on a mortgage calculator. I have tried higher amounts just to see and of course it doesn't allow you to borrow as much.

This way would be better for us as we can save along side paying the debts and then we would only have minimal debts (around 1500 per person of credit card debt all on 0%, which spread over the payments above would be cleared by the time the 0% finishes)

So in a nutshell - saving along side paying our debts could potentially see us moving in about 6/8 months ahead of it we were to have 0 debts.

Do people apply for mortgages with debts or will it ruin my application?

Many thanks

amnblog

Yes, people apply for mortgages with current debts.

Student loans are perfect examples, as are car loans.

Sweet_Girl_x

Thank you for reply.

So credit card debt is OK too? Do you think I should continue with my plan and apply for the mortgage quicker in that case?

Does the amount owe work against you or the actual payment amount? As previously stated our debts by this point will be about £1500 each.

When I apply for the mortgage will the bank want to know the minimum payment needed for the credit card or the amount I plan to pay to clear it by the time the 0% ends?

Thanks

Whats_your_forte

Some lenders work differently in terms of the credit card debts. They may allocate 5% of the debt as a monthly commitment or sometimes 3% or lower. This could affect the overall affordability with different lenders.

Without knowing the full background, it is difficult to say which should work better but if you have credit card sitting at 0%, then by keeping the money in savings, you aren't paying any unnecessary interest so a balance between the two may be a good way of going forward

Sweet_Girl_x

Thank you for replying.

At the stage I will be applying for the mortgage I will be paying £161 per month on the credit card to make sure it is paid off before interest hits. So on the debt of 1500 will be over 10%, so it is interesting that they may only count it as 5% (and of course my minimum payment would be even less than this)

I am thinking this is the right approach too.


Thanks again

foxy-stoat

For £200,000 property you will need £10,000 cash minimum for deposit, £2,000 for moving fees, £1500 for legals.

If your combined income is less than £47,500 then your debts need to be zero, if its more than as long as you pass affordability then it shouldnt be an issue.

You need to run your numbers past a broker as they will be able to advise you accordingly.

Good luck

ACG

Most applicants have some debt in my opinion.

Carrying some debt forward and moving sooner could even be financially better - generally if you are paying rent of more than what your mortgage would be.

[Deleted User]

foxy-stoat wrote: »

If your combined income is less than £47,500 then your debts need to be zero,

What does that mean? I very frequently help people with less income than that who arent debt free