Loan or Credit Card debt when applying for mortgage?

Frances13

We currently have a loan outstanding where we will be paying £500 per month back until October 2021. When I complete the mortgage calculations, if I leave the loan in it reduces down the amount the bank will lend us. Now if I move the loan amount to a credit card and use some savings to clear this, it increases the amount the bank will lend us for a mortgage.

Does anyone know if I'm better off clearing the loan with a money transfer and savings or leaving the loan outstanding for the application.

The mortgage broker I spoke to seemed unsure and I don't want to mess things up by applying for a money transfer close to a mortgage application.

520d2012

Hi Frances13
The reason you get more with the balance on the credit card is because the lender will calculate it at 3% of the balance. Assuming you have a balance of approximately £6k the lender will see this as a commitment of £180 per month.
I was in a similar position and was advised by my broker to transfer the debt - but make sure you get a settlement statement from the loan company before applying as this was put in to the package the broker sent to the lender.
Note - I am not recommending that you also do this, just advising what I was asked to do.

Frances13

Thanks @520d2012