Clear Debts Before Obtaining Mortgage

Chubba

Hi

My wife and I are looking to move house, selling our current house.

I have some credit card debt on zero interest. Generally would it be better to clear this before getting a mortgage (would we be able borrow more in doing so) or would it be better to keep the debt on zero balance?

I have savings to be able to clear the balance but my thinking is to keep it on zero interest and keep the savings in case we need it for doing some bits and bobs on the new house. 

Thanks

Hoenir

Existing debt could influence what a lender will potentially lend you. 

ACG

From a borrowing capacity perspective, 99% of lenders will ignore it if it is being cleared prior to completion of the mortgage (they ask if it will remain or not). 

From a credit scoring perspective, it will play a factor along with the limits, payment history etc. 

All things being equal, if your application is generally a good one and your maybe lower than 85% of the limits, you should be ok. But there is no exact science and what will be a problem with one lender will likely be ok with another. 

Elchie232

I recently got a 5-year fixed mortgage accepted, with about £4,500 on a 0% interest credit card. Did not impact us negatively. I guess it very much depends on your own cirumstances. Like we both have good credit history, and the card will be paid off in full by Jan 2026 (our broker asked us this, but not sure if makes a lot of difference). We both have cars on PCP so maybe £4,000 on a card is tiny compared to that?