What should I pay off first?

Matthewleigh23

Hi all. 

Not sure if this is right category to post in. 

However I’d like to know opinions. What’s best to pay off first? 

I have 0% credit cards around 11/12k 

I have a loan

a mortgage. ( I can only pay off 499 extra a month without early repayment fees ) 

I would like to possibly buy another property, but it seems that my debt outweighs me
being able to mortgage again or even port my mortgage (as my debt is too high)

I know the above might seem a little obvious and you’d prefer to pay off mortgage due to interest and maybe credit cards to lower my debt. 

I also have car finance (a tesla that I got in march) 

I assume I could also pay that back faster too but don’t think the Hire purchase will make much difference. 

I’d just like some advice on how best to lower my current debts to help for the future and decrease my debt to income ratio.  

Thank you all for any advice. 

Matt

Matthewleigh23

Matthewleigh23 said:

Hi all. 

Not sure if this is right category to post in. 

However I’d like to know opinions. What’s best to pay off first? 

I have 0% credit cards around 11/12k 

I have a loan

a mortgage. ( I can only pay off 499 extra a month without early repayment fees ) 

I would like to possibly buy another property, but it seems that my debt outweighs me
being able to mortgage again or even port my mortgage (as my debt is too high)

I know the above might seem a little obvious and you’d prefer to pay off mortgage due to interest and maybe credit cards to lower my debt. 

I also have car finance (a tesla that I got in march) 

I assume I could also pay that back faster too but don’t think the Hire purchase will make much difference. 

I’d just like some advice on how best to lower my current debts to help for the future and decrease my debt to income ratio.  

Thank you all for any advice. 

Matt

Also just to add. For my hire purchase. Additional payments don’t decrease the monthly outgoing cost just decrease the length of the term. 

surreysaver

Pay off whichever debt is the most expensive (i.e. that with the highest interest rate)
But take into consideration what happens when the 0% credit cards runs out - does that become the most expensive debt and will you be able to pay it off?

paul_c123

WHEN do you want to buy another property? Its worth getting your finances looking better about 6 months before any prospective mortgage applications. 

Its not worth paying off the credit cards if they are 0% - wait for the promotional offer to expire, then pay them off. Obviously the detail is, which expires first etc. You should do a calculation to see if your savings, or ability to save, matches a future upcoming credit card payoff. If it does and there's an excess, that excess could be used to overpay the mortgage or as a savings buffer.

ManyWays

Your current borrowing affects how affordable a new mortgage looks to a lender. This applies to credit cards, where 0% deals are treated the same as ones you are paying interest on. Car finance is treated the same as any other loan.
This calculator from Santander gives you a clue about how important these factors are https://www.santander.co.uk/personal/mortgages/mortgage-calculators/how-much-could-i-borrow. It wont apply directly to you as you are talking about a second property but it gives you a rough idea of the impact on lending of different types of debt.
A mortgage lender will also normally expect you to have a higher deposit on a second property than a first.