First time buyer, Save for deposit or pay off credit card due

jkcool

Hi,

I am planning to buy a house in 8-9 months. We have not started saving much as we had some credit card dues, which were on 0% APR for 2-3 years. We have paid of most of them and only two things which are remaining is 1) £5,500 with Barclays credit card (0% ending in May 2021) and £5,500 personal loan with Nationwide (2.5% APR, 2.5 years remaining). Currently we have £4,000 in current account and another £5,500 in company shares.

I have excellent credit score and never missed a payment deadline. Last credit card that I applied was in May 2019. The maximum mortgage amount  I can get is much higher than the kind of house that I am trying to buy. I have recently changed job and I will be able to save more each month now . Should I pay off my £5,500 credit card due with Barclays or should I do a balance transfer to MBNA which will charge me 3.9% APR for 3 years ? It will help me to save additional £5.5 k towards my deposit. I need to hit 10% deposit and it will be around 26-28K.

K_S

@jkcoolGenerally speaking, it depends on the numbers involved - how much you need to borrow, what's the minimum deposit you need and your income.

Try playing around with a couple of lender affordability calculators to get a very general idea of what the impact may be if you do/don't pay off the 5.5k cc debt prior to applying for a mortgage.

https://www.nationwide-intermediary.co.uk/calculators/affordability-calculator

https://www.halifax-intermediaries.co.uk/tools_and_calculators/mortgage_affordability_calculator/default.aspx

dimbo61

So 10% deposit is £26/28,000 on a £260/280,000 property !
If you can afford this size mortgage and I assume you have put your joint incomes into one of the many lenders mortgage calculators then you need to do both.
IE save hopefully into LISA ISA,s and clear as much of your debts as possible.
We are in the middle of a Pandemic and spending in general has dropped big style.
Look at all your outgoings and cut back where possible.
Sky, gym , eating out or takeaways, regular direct debits and memberships.
Look at every single penny you spend.
Take lunch with you to work, buy a flask for your coffee fix.
Shop at Aldi not M&S or Booths.
Save 
No point paying 3.9% fee if your getting 0.5% on your savings so clear the credit card debt first.

Thrugelmir

Clearing your debts quicker will enable you to save faster. Little point in wasting money. As @dimbo61 suggests time to cut back and spend wisely. 

jkcool

dimbo61 said:

So 10% deposit is £26/28,000 on a £260/280,000 property !
If you can afford this size mortgage and I assume you have put your joint incomes into one of the many lenders mortgage calculators then you need to do both.

Based on income , I could afford £320-£350k. But the main problem is raising the deposit because I was clearing debts.  So I thought I could save more with that 5K. 

dimbo61 said:

No point paying 3.9% fee if your getting 0.5% on your savings so clear the credit card debt first.

Over 2 years for 5K, it could cost me around £400 in interests. But it will help me to hit the deposit target. May be I will take a middle ground by paying off say £2,500 and transfer £3,000 to MBNA.