First time buyer mortgage with open loan

kishoregupta

Hi All, Apologies if I have entered my question in the wrong forum as I am new here.
We are a couple with a household income of 100k per year and first time home buyers. We have a personal loan with a balance of £4500 and interest-free credit card balance to pay with £8500, I have these paid in monthly EMIs without missing payments for the next two years. I have £20000 in hand as cash. We hope to save another £30,000 at the end of this year if we keep paying just the instalments for the above-said loan without fully paying off. We both have excellent credit scores. My wife has been in this country only for the past three years. 

If we just continue paying the EMI without settling then our outstanding debt at the end of this year would be around 9000. 

Our overall scenario would be roughly 50000 cash + £9000 debt in hand.
So my question is should I pay off the loan before looking for a mortgage or this won't have any impact with the mortgage application as long as I keep paying? I can pay it off now if I want to but my thinking is that I would have 10k less for the deposit. Please advice. 
As of now, we are also inclined towards help to buy scheme as we don't think we will have the 10% deposit, stamp duty cost and other cost associated with buying a house for the kind of house we are looking at. 

boo_star

You're paying interest on the personal loan, presumably? If you are why on earth wouldn't you pay it off?
And pay off the credit card too and continue saving.

Sncjw

What kind of house are you looking at. I would rather be debt free especially at that amount. 

Also I’d rather own my house myself and not have to pay the government money back when it comes to selling it or have the debt of that over my head too. 

csgohan4

with that income, you will be able to save a deposit quicker, but hammer that debt down, it will affect your affordability and interest rates wont' be cheap on that loan

ACG

How much are you hoping to get a mortgage for? If you are hoping to get £500k then you may find the debt needs clearing, if you are looking for £400k then it probably wont. In which case it just comes down to whatever your preference is. 
On your incomes, it is not a massive amount of debt. 

davidmcn

kishoregupta said:

I have £20000 in hand as cash. 

I hope not literally "cash". If so, I would recommend banking it as soon as possible.

kishoregupta

boo_star said:

You're paying interest on the personal loan, presumably? If you are why on earth wouldn't you pay it off?
And pay off the credit card too and continue saving.

boo_star said:

You're paying interest on the personal loan, presumably? If you are why on earth wouldn't you pay it off?
And pay off the credit card too and continue saving.

Interest is very very less, even if I completely pay off the loan right now then I might only save a maximum of £100 hence why the dilema. 

kishoregupta

Thanks for all your valuable feedback, I'll provide a bit more context. 
100k is our gross income.
We are looking at a maximum of 500K to take advantage of the first time buyer stamp duty cost. We ideally would prefer a house over a flat but for that budget, houses are quite remote away from stations.  We live in London now but we are looking for somewhere from zone 4 to reading with something at walkable distance to train station into London. 
If we should pay off the loan, how far in advance should we pay off? when do we speak to mortgage advisor? we will only be in a situation to buy something Jan 2021 latest. How much should I need to buy a property of 500K with all associated cost including deposit with and without help to buy scheme? Sorry if I am asking a very obvious question which might already be there on the internet or here but might give you an idea how new I am to this to help answer my question. 

Chavy89

davidmcn said:

kishoregupta said:

I have £20000 in hand as cash. 

I hope not literally "cash". If so, I would recommend banking it as soon as possible.

  

Thrugelmir

On a £500k purchase. Stamp duty is going to be £15k alone. For the solicitors costs ring a couple and obtain estimates. 
Personally I would clear the debts and be done with. If nothing more than makes your credit profile look better. Having a £100k income and debts simply raises questions. 

Windofchange

We've just had our mortgage offer through on very similar figures to yourself. Weren't looking for 500k, but not far off. Identical deposit. You will get 4-440k with your debts and incomes no problems. 500k will be a stretch however. We were approved for a £463k mortgage with near identical earnings and 11k of debt with a 30k student loan. Use the Halifax how much can I borrow calculator as it is more in depth than most, and lets you have a good play around with your figures. I needed to put in north of 50k of credit card debt, or £1200 per month repayments before it made any difference to my borrowing. With what you will have, you will get a mortgage no problem, but I would be surprised if you got £500k even with zero debt. 

Why are you looking for help to buy? You have enough money to get a decent sized 3/4 bedroom house in all but prime time London. Zone 4 certainly shouldn't be an issue. Why pay the inflated new build premium when you don't have to?