I want a mortgage

wigglers · 7 June 2018 at 11:08PM

Hi I currently have some debt in credit cards I have been paying the non each month and they are 0% free. I have managed to accumulate 8-10 k my question is should I pay the cards off before applying for a mortgage or keep that as a deposit and continue. Paying the cards? We really need a bigger house ASAP but if I pay the cards off the mortgage deposit disappears?

Not sure what to do to be honest please help currently have £4100 that ends 0% soon have another 2k in that card for 1 year and also have 3k on another mbna due to end Oct...

flower77g · 7 June 2018 at 11:44PM

I'd consider paying off the £4,100 that ends soon, and the £3,000 on the MBNA card before October, from savings. If you need a bigger house you'll have to find a lender that is happy to lend you a larger amount on a higher LTV or delay moving. On the limited information here it seems doubtful it would pass an affordability check whether or not the cards are paid off.

wigglers · 8 June 2018 at 7:30AM

I am. Paying 825 a month rent at the minute so can afford a mortgage, but I'm guessing it's no good even applying whilst having 8-10k on cards? I just worry that if I pay it off I will not have the Jens to get this amount up together again... I get 921 as a score on experian so am credit worthy I believe...

MallyGirl · 8 June 2018 at 9:21AM

The affordability check oisn't as simple as 'IO have been able to afford x so far'. It has to factor in potential interest rate rises and will take account of all existing borrowing, commitments, etc.

wigglers · 8 June 2018 at 11:37AM

Yes I realise that.. Just not sure what's the best way to go? Is it worth getting advice or. Just clear everything and then consider getting advice??

leicestersq · 8 June 2018 at 12:35PM

I would put your money where the highest rate of interest is.

So if you have for example, £1000 earning 1% in a savings account, and owe £1000 on a credit card currently charging 0% interest, keep it in the savings account. If you think about it, doing this will net you £10 per year.

Savings Account - £1000 * 1.01 = £1010 after one year.
Credit card - £1000 - (1000 * 1.00) = £1000 owing after one year. Net position = £1010 - £1000 = £10 better off by keeping both accounts open.

If that changed, and the credit card started charging you 2% interest, then you should move the money to pay off the credit card.

Savings account - £1000 * 1.01 = £1010 after one year.
Credit card - £1000 - (1000* 1.02) = £1020 owing after one year.

Net position = £1010 - £1020 = £10 worse off than closing both accounts.

The lender should look at your overall position including deposit and debt, and net them off against each other to assess your ability to afford the mortgage. Every bit of extra you can gain by putting your money where the best interest rate is will help in that assessment.

Million_Percent · 8 June 2018 at 12:59PM

Go see a friendly independent mortgage adviser. Clearly you can't buy a house without a deposit so the question really is, "Will you get a mortgage with that level of CC debt?" Difficult for any of us to comment on without knowing more about your overall finances. Mortgage affordability checks take into account the whole picture and consider future scenarios. I had a experience where my lender said they could only offer the mortgage if we reduced our CC debt by a certain amount. It wasn't all or nothing. They just said you have £x CC debt, you need to reduce it by £y before we will lend you the money. It may be that you only need to pay off some of the debt before you get a mortgage.

I want a mortgage

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