Paying off debt and upsizing with mortgage.

Maroisme

I currently own a 3 bed semi property with around £200k in equity. I’m looking to upsize due to my 4 children growing fast and needing their own bedrooms, so looking at selling and upsizing.

Here is where the potential issue arises, myself and my partner have combined debt of £36k, a mix of car loans, credit cards and unsecured etc. We never miss payments and both have credit scores over 800. Just built up more than we should have during covid years and whilst my partner was on maternity leave. 

I'm hoping to take some equity when selling and pay all debts off in full. Only issue I’m having is when applying for a new mortgage I’m concerned that amount of debt will hinder the amount we can burrow. 

Just the payments we are making on paying off the debt, would more than cover the extra mortgage payment for higher amount we need to upsize.

Does anyone have experience or know of an example, where the lender will take into account debt will be paid all in full upon receipt of funds, and accept a mortgage application as if no debt is present. Because currently we are struggling to burrow the amount we need to move due to the payments being made on the debt.

i did table the option to sell current house, pay off all debts, rent a property whilst applying for a mortgage again, with no debt, thus being able to burrow more than enough for the upsize we require. But my partner is very against this, mainly due to having 4 children under 8 and the upheaval of moving twice in quick succession. 

Any advice would be appreciated, if you’ve been through similar or know any way around it I’d like to hear from you. 

DE_612183

You used to be able to tick a box on a mortgage application ( with some lenders ) to say the debt will be paid off at the point of completion - and it may get checked by underwriters - not sure if this is still the case now.

Either way when we did the mortgage company came back 3 months later and asked for proof of the debts being paid off - what they would have done if they weren't I don't know...

Probably a question for the mortgage advisor with the company you are getting the mortgage with as different lenders may have different views.

kingstreet

Most are alright with debt being repaid from sale equity and ignoring the monthly cost. Avoid Santander and Platform though.

Hoenir

Maroisme said:

Because currently we are struggling to burrow the amount we need to move due to the payments being made on the debt.

Could you reduce the debt significantly if you put your minds to it for a period of time ? The concern for any lender is that you will continue to spend now pay later. Accruing another large amount of debt again in the future. 

rachpid

We're just in the middle of something similar - we are waiting for proceeds of selling my MIL's house (finalising the estate), we have similar debts to you, also with high credit scores and we had the option to mark off that these will be paid off in advance of taking the mortgage. We've had our MIP and are just about to begin the full application. We have gone through a mortgage broker, might be worth doing the same and getting their advice?