Should I accept gift to pay off CC before mortgage application?

Dolly867

Hi! 

My partner and I are going to start the process of buying our first home together in the new year. 

My partner/his parents are providing 80% of the deposit amount. I will be providing 20% from my savings. 

I have a credit card debt of just over 2k on 0% interest. My mum has very kindly agreed to give me the money to pay this off so that I don't have to eat into my savings to do so. Can you advise on which of the below would be the best course of action so as not to throw up issues with the application process? I was going to proceed with B but am worried it will look like I'm trying to hide something and cause more issues. 

A.) Mum transfers 2k amount to my bank account and I pay off CC as a lump sum. I think the risk here is that mortgage provider may find this to be a strange transaction when looking at my statements and want to have proof of where this amount came from even though it's not directly for the deposit?

B.) My mum uses her card to pay my credit card directly (I have checked and my CC provider does allow payments from other cards, not just my linked account). Likewise, I'd be worried that the mortgage provider might notice the drop in debt on my credit file and that it could raise questions about my eligibility? Is this the better way to do it so that it doesn't flag up, given the payment is not recorded on my own statements? Would they look at my level of CC debt in such detail that they can see how recently it was paid off, and in a lump sum?

C.) I pay the credit card from my own savings and lower the amount of deposit I have. Would paying off a lump sum like this right before a mortgage application look bad? Could still accept 2k gift from mum but would need to declare and provide a letter to state it's a gift etc. 

D.) I include the debt on the mortgage application and it impacts our affordability. Obviously this one feels like the worst option to me because it might have a longer term impact on our situation?


I know that there are lots of variables but keen to understand how the above options might be seen in the eyes of lenders and any risks there might be that I haven't considered. 

I also know the buying process can be longer than anticipated, so I'm not sure at what point lenders will look at my finances in this level of detail, is it during MIP application or once we are moving to buy a particular property?

Any help, insight, personal anecdotes hugely appreciated!

la531983

You are over thinking it.

No solicitor is going to ask for proof of funds for things you paid off elsewhere, they have no right to and they wouldnt even know anyway, their task is the mortgage. They want proof of funds for the deposit, not £2k you paid off a credit card a few months previously.

Just give your mother the sort code and account number (and 16 digit card number) and get her to make a bank transfer to pay it off. If anything this is a better option than her giving you 2k for the mortgage as its one less thing to prove.

When I remortgaged (bought more equity in house) 5 years ago I paid £11k off my mortgage in a bank transfer, during the conveyancing process. Not an eyelid was batted. Even the solicitor rang me and said her figures seemed to be £11k short, told her why and she laughed and said oh no problem.

Isthisforreal99

You don't have to have zero debt when applying for a mortgage, it's only £2000. When is it interest free till? What are the monthly minimum payments, are you just paying the minimum?

Do you think affodability might be an issue?

Dolly867

Thank you. It's interest free until June 2026 so I could just continue paying what I'm paying (£60) which is slightly above minimum (£45). I haven't been in a rush to pay it as it's 0% but I think I have been spooked by hearing stories of people being pulled up on random transactions in their statements and worried that it will impact how the lender perceives me as an applicant. 

Affordability isn't a huge issue as both myself and my partner make above London average and we have a 10% deposit and no real liabilities, though we are looking to buy in London so will likely be pushing to the top end of what we can afford, which makes anything that could throw that off feel quite scary!