Impact of healthy 0% debt on mortgage chances

sultanoflondon

Hi all,

Was wondering about the above. For example, if I take out a 20 month 0% credit card, and make the minimum monthly payment for 20 months, and then at the end of the 20 month period I repay the entire debt, are my chances for mortgage approval within those 20 months negatively affected? What about if I were to apply for a mortgage one month after the 0% period ends?

Thank you!

Nebulous2

It will depend how close you are to your limit mortgagewise. Look for some lenders mortgage calculators, put in different amounts of debt and it will tell you what difference that makes to the amount you can borrow. Getting a mortgage is (or was pre-coronavirus) possible with debt but it reduces the amount you can get.

eskbanker

Not sure anyone can give a meaningful one-size-fits-all generalised answer as much will depend on your overall financial circumstances, not least your indebtedness at the point of applying, but if you anticipate being able to settle it at the end of the term then it might make more sense to do so before going for the mortgage.

Willing2Learn

Experian will be recording that you are on a promotional 0% APR rate.  So there won't be any negative markers showing.  You should be good to go...

Shashannah

Me and my partner are looking to buy a house, however i am a recent graduate and therefore have a graduate account which has a 0% interest overdraft which I have about half left to pay off. I have a direct debit set up to pay a portion off every month whilst still saving money for a deposit. Am I likely to be accepted for a mortgage? 

[Deleted User]

Not nearly enough information to say.  But the lower your debts, the better your affordability and the lower your risk.

Shashannah

The debt is small, under £1000. I was just wondering if the overdraft part would affect my chances? Would it be better on my credit card which is currently empty but obviously has an interest rate and closing down my graduate account? I’m not sure which would look better on a mortgage application. 

[Deleted User]

Neither is good but taking cash from your credit card to clear it would be the worst idea of all.

Either clear the OD or at least shift it to a 0% offer.

surreysaver

Willing2Learn said:

Experian will be recording that you are on a promotional 0% APR rate.  So there won't be any negative markers showing.  You should be good to go...

This isn't always the case. My 0% Sainsbury's credit card doesn't show as a promotional rate.
I queried this with them, and they confirm this is a piece of information they don't share with the CRAs