Should I use money to put more in mortgage deposit or to pay off debts?

Windofchange

You state at the start you have a 50k salary between you. Then you state 50-60k after tax. The amount you can borrow will be based on gross earnings (pre tax), and usually 4 - 4.5 times salary. So, if you are earning 50k between you then you can’t afford a 250k home anyway unless you have a big deposit - 25k or so plus a mortgage for 4.5 x joint salary of 225k. If it’s 60k after tax then that makes things a bit more likely and 250k will be affordable for you. 

In terms of paying off the debt I guess it depends on how close to the cloth you are cutting the affordability. As per previous replies, get on the banks website and play with the numbers on the calculators they have. Be as honest and accurate as you can with all the numbers and you will be able to fiddle to your hearts content with various deposit size and debt amounts. 

K_S

namieco said:

@K_S Combined income is about 50-60k after tax. So you would think we'd be better off trying for a 10% deposit, and keeping the debt pretty much where it is?

@namieco With an after-tax income of 50-60k (70k+ gross) and looking to borrow only 237k, the 7k background debt will not make any difference to your borrowing. You don't really need to worry about it impacting your mortgage chances. This is based on the limited info in your post, there may be other relevant info in the background.

Whether it's with a 5% deposit or 10%, you should be comfortably home on affordability. The 7k debt is unlikely to be an impediment in either scenario.

namieco

Windofchange said:

You state at the start you have a 50k salary between you. Then you state 50-60k after tax. The amount you can borrow will be based on gross earnings (pre tax), and usually 4 - 4.5 times salary. So, if you are earning 50k between you then you can’t afford a 250k home anyway unless you have a big deposit - 25k or so plus a mortgage for 4.5 x joint salary of 225k. If it’s 60k after tax then that makes things a bit more likely and 250k will be affordable for you. 

In terms of paying off the debt I guess it depends on how close to the cloth you are cutting the affordability. As per previous replies, get on the banks website and play with the numbers on the calculators they have. Be as honest and accurate as you can with all the numbers and you will be able to fiddle to your hearts content with various deposit size and debt amounts. 

I meant 50k after tax. On every mortgage calculator I have tried there seems no issue with letting us buy a house around 250k (some even suggest higher, as in 260/270k) with a 5% deposit, even with current debts. But just want to make sure there won't be any nasty surprises, or things I can do now that will help. 

Emmia

namieco said:

Windofchange said:

You state at the start you have a 50k salary between you. Then you state 50-60k after tax. The amount you can borrow will be based on gross earnings (pre tax), and usually 4 - 4.5 times salary. So, if you are earning 50k between you then you can’t afford a 250k home anyway unless you have a big deposit - 25k or so plus a mortgage for 4.5 x joint salary of 225k. If it’s 60k after tax then that makes things a bit more likely and 250k will be affordable for you. 

In terms of paying off the debt I guess it depends on how close to the cloth you are cutting the affordability. As per previous replies, get on the banks website and play with the numbers on the calculators they have. Be as honest and accurate as you can with all the numbers and you will be able to fiddle to your hearts content with various deposit size and debt amounts. 

I meant 50k after tax. On every mortgage calculator I have tried there seems no issue with letting us buy a house around 250k (some even suggest higher, as in 260/270k) with a 5% deposit, even with current debts. But just want to make sure there won't be any nasty surprises, or things I can do now that will help. 

Have you factored in the associated costs like stamp duty (depending on how long it takes to buy /property price) product arrangement fees, conveyancing, removal costs etc. Plus you may need more / different furniture...

Justonemorecupoftea

Emmia said:

namieco said:

Windofchange said:

You state at the start you have a 50k salary between you. Then you state 50-60k after tax. The amount you can borrow will be based on gross earnings (pre tax), and usually 4 - 4.5 times salary. So, if you are earning 50k between you then you can’t afford a 250k home anyway unless you have a big deposit - 25k or so plus a mortgage for 4.5 x joint salary of 225k. If it’s 60k after tax then that makes things a bit more likely and 250k will be affordable for you. 

In terms of paying off the debt I guess it depends on how close to the cloth you are cutting the affordability. As per previous replies, get on the banks website and play with the numbers on the calculators they have. Be as honest and accurate as you can with all the numbers and you will be able to fiddle to your hearts content with various deposit size and debt amounts. 

I meant 50k after tax. On every mortgage calculator I have tried there seems no issue with letting us buy a house around 250k (some even suggest higher, as in 260/270k) with a 5% deposit, even with current debts. But just want to make sure there won't be any nasty surprises, or things I can do now that will help. 

Have you factored in the associated costs like product arrangement fees, conveyancing, removal costs etc.

Exactly what I was going to say - we were quite naïve about the additional costs associated with buying a house!

Thrugelmir

namieco said:

grumiofoundation Option 1 is option 4. I almost have the 5% deposit, but not quite. It will take a few more months.

Our debt is 7k combined, we are looking at a 250k house.

I've just been approved for a 0% balance transfer card to stop paying interest on my credit card- didn't know this was even a thing! Thanks for advice.

You've in essence a £1,000 per week to live on. If you aren't even aware of the interest you are paying. Nor previously made any real attempt to repay your debts. Do you actually know where your money is going and what it's being spent on?  Perhaps spend a few hours over the weekend reviewing your finances. You might be surprised how much you can cut back on. 

goldfinches

Thrugelmir said:

namieco said:

grumiofoundation Option 1 is option 4. I almost have the 5% deposit, but not quite. It will take a few more months.

Our debt is 7k combined, we are looking at a 250k house.

I've just been approved for a 0% balance transfer card to stop paying interest on my credit card- didn't know this was even a thing! Thanks for advice.

You've in essence a £1,000 per week to live on. If you aren't even aware of the interest you are paying. Nor previously made any real attempt to repay your debts. Do you actually know where your money is going and what it's being spent on?  Perhaps spend a few hours over the weekend reviewing your finances. You might be surprised how much you can cut back on. 

You'll also be surprised at how much you're paying for and either not using or buying twice because you're still being debited for something you haven't yet spotted.
Seriously, spend half an hour or so going through your bank statement and your receipts for the past few days and there will be something there for you to find.
Once you start doing that sort of review all sorts of ways you're being rather sneakily taken financial advantage of will come to your attention.
Then when you start getting into really detailed looks at which gas/electricity/broadband/mobile providers you're paying and how much you'll be feeling like punching someone, I know I was.
Then after that you can get into packaged bank accounts, overcharging on bank fees and PPI reclaims if you haven't already not to mention seeing if your Council Tax is set at the right band and on and on. 
Essentially, doing all this will find you some things you can stop paying for right now and others where you are owed money which you can then set about clawing back so get checking and you can probably knock a chunk of your debts on their heads which is massively satisfying.

AdrianC

You might fool yourself that +£13k savings in one hand and -£7k of debts in the other are different things, but you won't fool lenders.

You have +£6k of assets. That's all. Pretending otherwise is counterproductive.

Your pretence is also costing you money, because you're paying far more interest on the debts than you are getting on your savings.

ukri

K_S said:

namieco said:

@K_S Combined income is about 50-60k after tax. So you would think we'd be better off trying for a 10% deposit, and keeping the debt pretty much where it is?

@namieco With an after-tax income of 50-60k (70k+ gross) and looking to borrow only 237k, the 7k background debt will not make any difference to your borrowing. You don't really need to worry about it impacting your mortgage chances. This is based on the limited info in your post, there may be other relevant info in the background.

Whether it's with a 5% deposit or 10%, you should be comfortably home on affordability. The 7k debt is unlikely to be an impediment in either scenario.

This is good advice OP. If you are still working towards saving up for a deposit, paying off your debt may delay your plans without improving your chances.

Lenders see savings and debt as separate. When I used to stooze all my deposit was effectively borrowed but it didn’t make any difference to the mortgage as the debt was reasonable when compared to income.

speak to an adviser as soon as you have the 5% in your LISA, I’m sure you will have options.

HampshireH

Some lenders want to see debts cleared.

I was always told student loan didn't count in affordability assessments. But as I was in the last year and paying by DD (as recommended by SLA) our lender insisted I pay that off

 It was our only debt and was about a grand (so less than £100 a month)

I cleared it straight away but it was frustrating and caused unnecessary delays. 

That's on an assessment where as an individual I had £1300 to play with after bills every month let alone combined income.

I'd always aim to clear debts as it just makes things easier. Less stress on application too not having to worry about what the lender may say