Advice on Re-mortgage / New Home / Credit Card Debt

GRZ

Hi All,

After some advice around a potential re-mortgage / house move.

I am in a position where my mortgage (fixed 5 yr 2.19%) is due to come to an end in December, and im currently looking at either a re-mortgage at our currently house, or a move to a new house due to outgrowing where we are.

however there is some considerations before this around some credit card debt / cash and the advice im after is on if i should pay off my credit card, over pay my mortgage or save for a large 'deposit' when i re mortgage or buy.

current debt details are:

Credit Card - £7300 - Interest Free until June 2024.
Mortgage £156,000 remaining 
House Value £302,000 (current bank valuation) but local interest is around £340,000 for houses in 'worse' condition than ours. example being weve had attic conversion/landscaping etc. all personal preference of course so subjective to buyers.
Help To Buy at 25% so around £75,000 - 80,000 to pay back roughly depending on sale value/fees

I have around £6000 currently saved up from work bonus/general savings and im trying to figure out the best way to use this, as well as a regular boost of £500 that I have now a previous loan is paid off - which would take it to about £10,000 by year end.

My options are:

1. pay off the credit card in full pretty much, but with it being interest free for another year im not sure if this is the best option - but also how would this debt look for a re-mortgage / house move etc if i didnt pay it off?

2. Overpay the mortgage a lump sum and setup a regular £500 overpayment (or as much as allowed within contract) effectively doubling my mortgage payments until the end of the year (which would take off around £10,000 overall before my current mortgage was up) and then move the credit card debt next year as a new balance transfer to keep the interest at 0% and continue with smaller payments to clear it in the interest free periods). 

3. Save the money ready for a move to have a bigger deposit. This, including other money/house sale profits etc would give me around £100,000 as a deposit for a new house (valued around £600,000) that we are considering, when after fees and stamp duty etc id be looking at roughly 85% for a mortgage. (this is all rough thinking with it being early and us just weighing up options)

any new mortgage is looking at around 4 - 5% - obviously this could change within the 6 months and if i went for 2 or 5yr fixed etc. 

my questions are, is it better to clear the credit card ahead of any re-mortgage or new house move/purchase. OR to overpay my current mortgage / save it for an increased deposit.

Thanks in advance if youve stuck with the long post!

kingstreet

GRZ said:

Hi All,

After some advice around a potential re-mortgage / house move.

I am in a position where my mortgage (fixed 5 yr 2.19%) is due to come to an end in December, and im currently looking at either a re-mortgage at our currently house, or a move to a new house due to outgrowing where we are.

however there is some considerations before this around some credit card debt / cash and the advice im after is on if i should pay off my credit card, over pay my mortgage or save for a large 'deposit' when i re mortgage or buy.

current debt details are:

Credit Card - £7300 - Interest Free until June 2024.
Mortgage £156,000 remaining 
House Value £302,000 (current bank valuation) but local interest is around £340,000 for houses in 'worse' condition than ours. example being weve had attic conversion/landscaping etc. all personal preference of course so subjective to buyers.
Help To Buy at 25% so around £75,000 - 80,000 to pay back roughly depending on sale value/fees

I have around £6000 currently saved up from work bonus/general savings and im trying to figure out the best way to use this, as well as a regular boost of £500 that I have now a previous loan is paid off - which would take it to about £10,000 by year end.

My options are:

1. pay off the credit card in full pretty much, but with it being interest free for another year im not sure if this is the best option - but also how would this debt look for a re-mortgage / house move etc if i didnt pay it off?

2. Overpay the mortgage a lump sum and setup a regular £500 overpayment (or as much as allowed within contract) effectively doubling my mortgage payments until the end of the year (which would take off around £10,000 overall before my current mortgage was up) and then move the credit card debt next year as a new balance transfer to keep the interest at 0% and continue with smaller payments to clear it in the interest free periods). 

3. Save the money ready for a move to have a bigger deposit. This, including other money/house sale profits etc would give me around £100,000 as a deposit for a new house (valued around £600,000) that we are considering, when after fees and stamp duty etc id be looking at roughly 85% for a mortgage. (this is all rough thinking with it being early and us just weighing up options)

any new mortgage is looking at around 4 - 5% - obviously this could change within the 6 months and if i went for 2 or 5yr fixed etc. 

my questions are, is it better to clear the credit card ahead of any re-mortgage or new house move/purchase. OR to overpay my current mortgage / save it for an increased deposit.

Thanks in advance if youve stuck with the long post!

Most of this depends on two things, your income/affordability and the savings rate v the mortgage rate.

Your income/affordability may be able to stand the knock of the card debt. Some lenders take 3% of the balance as a monthly cost, others 5%. The debt isn't massive so you are unlikely to have debt to income issues.

If the mortgage rate is higher, overpay. If the savings rate is higher, save.