Pay off c/cards or move?

greendale

Hi all! 

Wonder if anyone can offer any suggestions. Our fixed mortgage deal is coming up in Nov this year. We have approx £20k in c/card debt jointly. This was never going to be our forever’ home and was bought with a view to build up equity and then settle in the next one. The question I now have is (excluding anything to do with coronavirus) is it better to fix again for another 2 yrs and plough our spare cash into the c/cards or is it better to plough the cash into the house and get it ready for a sale instead in Nov? 

We have enough equity to get a decent deposit on the next one and be able to pay some c/card debt off too. 

I am desperate to move as it’s too far from my job (moved jobs after bought it) and the travel is not only costing a small fortune but also is knackering me. 

Don’t know if I’m better speaking to a financial or a mortgage adviser on this, any suggestions? 

Thank you! 

Thrugelmir

Whatever your longer term plans. A credit card debt of £20k is something of a mill stone around your necks. Personally I'd make that the primary objective. Let the mortgage take care of itself. Don't waste money on the property unnecessarily. You may well not see any great return.
November isn't the best time of the year to start marketing a property. Early 2021 may well be more fruitfull. Gives you more time to pay down your debts. 

Unicorn_cottage

Agree with @Thrugelmir and would add the following. How committed are you to paying off the debt? How much could you pay back over the coming year if you put your mind to it? Don't forget that when you move you will need to have a pot of cash to pay for solicitors fees etc as it can be an expensive business. Also why not consider a tracker/variable rate mortgage when you remortgage (that's if you decide to change lender) they often do not have any early redemption fees so if you did decide to move there isn't that worry. I have gone for a tracker as I think I will be moving in the next 2 years and it only cost me less then a £100 to do it.

ACG

If you have plenty of equity could you not use some of that to pay off the cards?
Any money you are saving from lower repayments and travel costs, throw that at paying off the remainder of the cards over the next say 12 months? 

There is a good chance you will struggle to get 0% credit cards over the next 12 months so it might not be a bad idea to be paying them down if you can. 

noisla

While you say "excluding anything to do with coronavirus", don't ignore the long term impact: potentially the biggest recession of the last 100 years, lasting for many years. If you are lucky enough to be earning money right now, I would "fix the roof while the sun shines" i.e. pay off credit debt, and get yourself into a position there you could survive without income for 6 months. Plan for the worst, hope for the best.

greendale

thank you thank you all so much for your replies, gives us food for thought. 

Does anyone know if high credit card debt has a significant impact on obtaining a home mover mortgage? Appreciate that it is circumstantial but wonder if high debt does generally mean you will struggle to get a mortgage from the high street lenders or if you do get it will be at a much higher interest rate. 

Not sure what the mortgage lenders look at when they are considering lending. 

EverythingIWant

ACG said:

If you have plenty of equity could you not use some of that to pay off the cards?
Any money you are saving from lower repayments and travel costs, throw that at paying off the remainder of the cards over the next say 12 months? 

There is a good chance you will struggle to get 0% credit cards over the next 12 months so it might not be a bad idea to be paying them down if you can. 

I was just in the same boat ACG! Some of my credit card debt was acruing interest, and eligibility checkers were coming back 0%.. lucky I went to my own bank last week and they swapped out my current card 19.9% to a 24 month BT and 12 month purchase 0% with 1.5% fee, phew! 

[Deleted User]

If your credit file is fine (i.e. no missed payments/defaults/CCJs/Bankruptcies etc.) then debts on their own won't kill an application at most lenders.

£20k is pretty high, but it's not outrageously high, especially on a joint application. Some lenders will apply automated checks (e.g. if your debt is over a certain % of your gross/net income, or if you're using more than x% of your available credit limits) and decline based on that, as they'd see you as higher risk.

But if you're on reasonable incomes that debt on it's own won't be a major issue - I'd expect a broker to be able to place you at normal rates if there's no other issues on the case.

Debt may be questioned, but should be ok as long as you can give an explanation - and look at how it won't occur again (it's probably unrealistic (in lenders eyes) to keep using equity to pay off debts - if lenders do query it they'll probably want to see you've addressed the root cause of the debts). You mention commuting etc. If you've got significant commute costs now, but won't have in the new property, then that's a positive (and probably helps explain some of the debt).

I definitely echo not spending money to do up the property unnecessarily, especially with the current situation. Unless it's a low cost for high benefit, it's probably not worth it.