Consolidation Credit Card, for Mortgage

EternalChi

I have been getting mixed AIP/DIP's as a result of outstanding Credit Card debt (£6K) and £8K loan.
I was given the advice (mortgage broker with High Street lender) to consolidate the Credit Card debt into the loan, as only the "loan repayment" per month is used in order to calculate affordability for the mortgage AIP/DIP and stress tests at a later stage.
I have now managed to get the CC debt into the loan, with the same repayment with extra few years (which is of little bearing); in order to get the mortgage.

Has anyone else faced a similar outcome? It;s either saving up for a bigger deposit (with residual income every month), or going towards paying the credit card.

I have managed to secure the loan today, (with now the inference, I will have to wait a good 5/6 months, before the Hard Search is not bearing) on the new mortgage.

Looking for some advice please.

Thank you
EC

K_S

@eternalchi Sorry to be pedantic, but if you spoke to a mortgage advisor who works at a high-street bank, that's not a mortgage broker and he/she doesn't have access to or knowledge of the wider mortgage lending market

Based on how you have decribed it, I would slightly disagree with the "advice" that he/she gave. For lender affordability calculations, consolidating the cc debt on to a personal loan may in fact even lessen the amount you can borrow. Just to be clear, that is not the same as an AIP coming back positive or negative.

If you have now consolidated all your debt into one loan, you certainly don't necessarily need to wait for 6 months because of the one hard check, that's a common misconception. If you are borrowing at the limit of your affordability, it would be advisable to wait until your credit reports accurately show that the cc debt has been paid off and the only remaining debt is the personal loan of 14k.

EternalChi

K_S said:

@eternalchi Sorry to be pedantic, but if you spoke to a mortgage advisor who works at a high-street bank, that's not a mortgage broker and he/she doesn't have access to or knowledge of the wider mortgage lending market

Based on how you have decribed it, I would slightly disagree with the "advice" that he/she gave. For lender affordability calculations, consolidating the cc debt on to a personal loan may in fact even lessen the amount you can borrow. Just to be clear, that is not the same as an AIP coming back positive or negative.

If you have now consolidated all your debt into one loan, you certainly don't necessarily need to wait for 6 months because of the one hard check, that's a common misconception. If you are borrowing at the limit of your affordability, it would be advisable to wait until your credit reports accurately show that the cc debt has been paid off and the only remaining debt is the personal loan of 14k.

Why would you disagree with the advice?
When the AIP's and a second broker asked the loan amount; they didn't take into consideration the length of the loan, but the monthly payment, in comparison to the Credit Card balances.
When do you advise to consider a further AIP/DIP, I was unsure of the misconception.

Thank you for your advice, I will wait until all the CC's show that they are paid off, and there is only a single loan.

Thank you

K_S

EternalChi said:

K_S said:

@eternalchi Sorry to be pedantic, but if you spoke to a mortgage advisor who works at a high-street bank, that's not a mortgage broker and he/she doesn't have access to or knowledge of the wider mortgage lending market

Based on how you have decribed it, I would slightly disagree with the "advice" that he/she gave. For lender affordability calculations, consolidating the cc debt on to a personal loan may in fact even lessen the amount you can borrow. Just to be clear, that is not the same as an AIP coming back positive or negative.

If you have now consolidated all your debt into one loan, you certainly don't necessarily need to wait for 6 months because of the one hard check, that's a common misconception. If you are borrowing at the limit of your affordability, it would be advisable to wait until your credit reports accurately show that the cc debt has been paid off and the only remaining debt is the personal loan of 14k.

Why would you disagree with the advice?
When the AIP's and a second broker asked the loan amount; they didn't take into consideration the length of the loan, but the monthly payment, in comparison to the Credit Card balances.
When do you advise to consider a further AIP/DIP, I was unsure of the misconception.
Thank you for your advice, I will wait until all the CC's show that they are paid off, and there is only a single loan.
Thank you

@eternalchi For affordability, generally speaking, lenders will take a percentage (around 3%) of outstanding credit card debtas a monthly outgoing. Consider £6,000 of debt -

- if you have cc debt of £6,000 that would be treated as a monthly commitment of about £180/month

- the same amount was as a 4% personal loan over a 24 month period, the monthly payment would be around £260/month

Of course, if the personal loan is over a longer period, it may work out to be better from an affordability point of view. My point was that it's not a black and white rule that consolidating cc debt on to a personal loan will improve your chances of borrowing what you need.