Credit Card Debt on Mortgage Application
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piggy_bank
Posts: 32 Forumite
Hi all, apologies if this is better off in the credit card section.
Myself and OH are saving to buy our first house, hopefully this time next year. We both have the help to buy ISA and are making decent savings. He has a small credit card allowance which he uses mostly for work expenses and clears every month, whereas I was given a large credit limit, and recently maxed it out to buy a car. I'm now looking at £3,500 debt on a £4000 limit, which has brought my credit rating down from 971 to 840-ish due to the spend/limit ratio.
I'm getting it down, slowly, but obviously every £ I spend getting it down is less for the deposit. Does having a chunk of credit card debt matter in terms of a mortgage application? Will my credit rating remain affected if I leave it at this usage %? Am I better off having an extra £3k for a deposit, and leaving it on the credit card (interest free!), or should I pay it off and have a smaller deposit?
Thanks for any advice!
Myself and OH are saving to buy our first house, hopefully this time next year. We both have the help to buy ISA and are making decent savings. He has a small credit card allowance which he uses mostly for work expenses and clears every month, whereas I was given a large credit limit, and recently maxed it out to buy a car. I'm now looking at £3,500 debt on a £4000 limit, which has brought my credit rating down from 971 to 840-ish due to the spend/limit ratio.
I'm getting it down, slowly, but obviously every £ I spend getting it down is less for the deposit. Does having a chunk of credit card debt matter in terms of a mortgage application? Will my credit rating remain affected if I leave it at this usage %? Am I better off having an extra £3k for a deposit, and leaving it on the credit card (interest free!), or should I pay it off and have a smaller deposit?
Thanks for any advice!
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Comments
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Your credit score is made up. Ignore it.
Different lenders will account for the debt differently, but will impact your affordability.0 -
How much mortgage amount are you looking for?
How much is your deposit?
What is your and your partners salary?I'm a Board Guide on the Credit Cards, Loans, Credit Files & Ratings boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views are mine and not the official line of moneysavingexpert.com0 -
We're looking for approx £150-170k mortgage, with a deposit of 12-15k. I don't expect we will quite hit 10%, unless a property comes up for less than 150k.
Combined basic salary is approx £50k, plus another £6.5k in bonuses which I assume won't count, nor the £4,500 we each get back for business mileage.0 -
My broker told me that any cc/loan debt we had the bank would take 5% total as minimum monthly repayment and deduct this from your salary multiples so your mortgage offer amount will be decreased accordingly (regardless of if your min repayment is 1% or its on 0% deal).
Assuming you both have no other cc debts/loans/overdraft or car finance and just based on the £3.5k you owe:
5% of £3.5k = £175 x 12 = £2.1k
£50k less £2.1k = £47,900 combined salary
£47.9k x 3.5 multiple = £167,650
£47.9k x 4 multiple = £191,600
You should be ok.
Are you buying a new build?I'm a Board Guide on the Credit Cards, Loans, Credit Files & Ratings boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views are mine and not the official line of moneysavingexpert.com0 -
That's really useful, thank you!
Nope, we won't be buying a new build. Does that make a difference?0
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