Consolidate credit cards with a bank loan before mortgage?

looprt · 23 January 2019 at 12:40AM

Hi,

I currently have 3 credit cards totaling an available limit of around 23k, I have used 8k of this limit across the 3 cards. All of the cards are on 0% interest deals with the first one due to run out July this year.

I am planning on trying to get a mortgage around Nov this year or early next year and did a quick check using a mortgage calculator to see how much I could lend. Basically 8k Credit card debt seemed to lower the amount more than the monthly payment of an 8k bank loan.

My dilemma is.. Do I pay the credit cards off with a low interest bank loan, and close 2 of the cards (Leaving one unused?). Or just keep bouncing the balance between interest free credit cards.

I've never had a mortgage before so I'm unsure which is best!

Many thanks.

Craig1981 · 23 January 2019 at 7:04AM

this may be useful read for you:
https://debtcamel.co.uk/mortgage-with-debts/

personally, i wouldnt pay interest on a loan when CC deals are at 0%

Sncjw · 23 January 2019 at 8:03AM

You do realise that the lender will reduce the amount offered on mortgage due to these debts.

PRAISETHESUN · 23 January 2019 at 10:03AM

Ignoring the fact that having CC debt will already likely disadvantage your mortgage application, I would personally keep the cards as they are since the debt is at 0% - the goal for consolidation is to reduce interested paid, and you will not be able to get a 0% bank loan.

Applying for a bank loan would also be a bad idea anyway for two reasons: firstly the banks will assess your affordability for the loan based on your CC debt (they won't know your goal is to consolidate) so you will likely get a bad rate, and secondly you want to keep your credit file as clean as possible for at least 6-12 months prior to applying for a mortgage, so recent loan applications will also hurt your chances of getting a decent mortgage deal too.

looprt · 23 January 2019 at 10:29AM

I understand the debt will have a negative impact on a mortgage application, I've used numerous online calculators though and they show that the maximum amount I can get even with the debt is still well above what I'll be needing.

It sounds like it will be best to keep the 0% credit cards.. my issue is one of them runs out in July this year meaning I'd need another credit card to transfer it to, although I could probably use one of my existing cards so shouldn't be an issue.

fwor · 23 January 2019 at 1:10PM

looprt wrote: »

my issue is one of them runs out in July this year

The obvious answer would be to put all new spend onto one of the other two, and focus on paying off the one that expires - while you have six months left to do it.

As you are planning to start mortgage payments soon you must know that you have spare cash each month, so seeing how much you can afford to throw at the credit card each month would be a good test of how well you will be able to afford the mortgage repayments from November onward.

Consolidate credit cards with a bank loan before mortgage?

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