How important are spending habits when it comes to a mortgage?

sinkquick

I'm being completely honest here but I've never been the best at saving but I've always paid my debts on time without failure. My debt includes two bank loans and a credit card which are currently at £27,000 combined.

The mortgage I'm applying for is at 2.5 times my current salary. I'm had a mortgage in principle accepted but I'm just going through the mortgage process and am very nervous as I'm a first time buyer.

I'm just wondering how important spending habits are as I've just had this (not for the best) mindset of after I've paid my bills and debts then I'll just do what I please with the money.

Thanks all!

MattMattMattUK

It is affordability rather than habits, lenders generally do not care if you spend £X on your hobby every month provided you are not running out of money every month, the only specific thing that seem to concern them is gambling. Ideally ahead of taking a mortgage lenders like to see people save every month, but mostly because that indicates that there is money left over every month. 

What does your broker think, or are you applying directly with a lender? 

sinkquick

MattMattMattUK said:

It is affordability rather than habits, lenders generally do not care if you spend £X on your hobby every month provided you are not running out of money every month, the only specific thing that seem to concern them is gambling. Ideally ahead of taking a mortgage lenders like to see people save every month, but mostly because that indicates that there is money left over every month. 

What does your broker thing, or are you applying directly with a lender? 

Appreciate the reply, Matt.

I'm just applying directly with the lender. Not a gambler but I do stick £20 on the lottery whenever I hear there's a good jackpot which would appear on my statements as it's done online.

I checked my credit score via ClearScore and it's saying that it is stable at 725.

retiredbanker1

There are good habits and bad habits.

Only you know how you have accumulated £27k of debts - if a potential lender sees you say gambling that is very bad, if they see you have taken out payday loans then that is catastrophic!

Mark_d

Lenders look at your track record - paying bills on time etc. They also look at your affordability - how much money you have left after you've paid all your bills. They can also look at poor practices in money management - such as taking cash advances on your credit card.

I've never done a budget per se and any savings I do are very much on an adhoc basis (if at all).  I don't think this is an issue.

£27k of unsecured debt could be cause for concern.  How did you end up with all this debt?  Do you tend to spend more than you earn?  If the interest rate on this debt went up to 35% and your mortgage went up to 7.5% would you still be able to get by?

Brie

Your credit history will likely show that you are paying the same amount each month on the loans - as that's the way that loans normally work.  And each month there's less loan left so each month you are becoming a better risk.  

I don't think they can see if you are taking cash advances or buying buckets of champagne by looking at your credit reports.  They might be able to see those things if they are the same bank as the card.  (so Barclays & Barclaycard).  But if you are then paying off the card in full each month you aren't struggling too hard supposedly.  There are good reasons for getting a cash advance occasionally - you're out and only have your CC but find the restaurant you and your friends are going to only takes cash.  Fine if it's occasional but not every single Friday late at night.

They will be able to figure out if you are paying the minimum on your CC as that will be a set percentage of the total every month.  And that shows you being a risk because you cannot clear more.  Better to pay a set amount each month instead.  So if the minimum was £179 but you set your DD to always clear at least £250 you will appear to be more confidently in control of your money.