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  • FIRST POST
    • wezhayw
    • By wezhayw 13th Mar 18, 10:16 PM
    • 3Posts
    • 1Thanks
    wezhayw
    First Time Buyer and Consolidating debt
    • #1
    • 13th Mar 18, 10:16 PM
    First Time Buyer and Consolidating debt 13th Mar 18 at 10:16 PM
    Hi long time lurker, first time registering and posting!

    The quick question:
    Would a lender prefer several short term debts? or
    one larger longer debt - with more disposable income?

    The long story:
    My partner and I were intending to buy our first house this summer,
    Currently I have a loan which ends in 9 months, and 2000 on a credit card, and though we're not struggling to make payments, after repaying the loan, making minimum repayment on the card, as well as current rent & bills we're not left with much at the end of the month.

    Before applying for a mortgage, would it be beneficial for us to consolidate to a new 2 year loan? Repaying the current loan and credit card in full, at half the monthly outgoing cost - leaving us with more cash after outgoings?
    Or would lenders prefer we pay off quicker?
Page 1
    • January2015
    • By January2015 13th Mar 18, 10:21 PM
    • 2,066 Posts
    • 5,145 Thanks
    January2015
    • #2
    • 13th Mar 18, 10:21 PM
    • #2
    • 13th Mar 18, 10:21 PM
    Hi long time lurker, first time registering and posting!

    The quick question:
    Would a lender prefer several short term debts? or
    one larger longer debt - with more disposable income?

    The long story:
    My partner and I were intending to buy our first house this summer,
    Currently I have a loan which ends in 9 months, and 2000 on a credit card, and though we're not struggling to make payments, after repaying the loan, making minimum repayment on the card, as well as current rent & bills we're not left with much at the end of the month.

    Before applying for a mortgage, would it be beneficial for us to consolidate to a new 2 year loan? Repaying the current loan and credit card in full, at half the monthly outgoing cost - leaving us with more cash after outgoings?
    Or would lenders prefer we pay off quicker?
    Originally posted by wezhayw
    Why on earth would you consolidate something that finishes in 9 months ?????

    I have no idea what mortgage lenders like to see but consolidation is rarely a positive move.
    DFW Nerd No. 1484 LBM 07/01/15 Debt was 95k I'm driving it down
    1k emergency fund (member #84) 1k/1k
    [COLOR=Blue][SIZE=2]
    • sourcrates
    • By sourcrates 13th Mar 18, 10:28 PM
    • 14,020 Posts
    • 13,278 Thanks
    sourcrates
    • #3
    • 13th Mar 18, 10:28 PM
    • #3
    • 13th Mar 18, 10:28 PM
    Consolidation loans send the message I cant afford my debt repayments

    Its usually the last step before debt management or some kind of insolvency, you dont want to be taking that path unless its nessessary.

    Why not pay off the debt first, then apply for a mortgage ?
    I'm a Board Guide on the Debt-Free Wannabe, Credit File And Ratings, and
    Bankruptcy And Living With It, boards. "I volunteer to help get your forum questions answered and keep the forum running smoothly".
    Board guides are not moderators and don't read every post. If you spot an abusive or illegal post then please report it to forumteam@moneysavingexpert.com. Any views are mine and not the official line of MoneySavingExpert.com.

    For free debt advice, contact either : Stepchange, National Debtline, or, CAB.
    For Free Legal advice see : http://legalbeagles.info/
    • wezhayw
    • By wezhayw 13th Mar 18, 11:30 PM
    • 3 Posts
    • 1 Thanks
    wezhayw
    • #4
    • 13th Mar 18, 11:30 PM
    • #4
    • 13th Mar 18, 11:30 PM
    Why on earth would you consolidate something that finishes in 9 months ?????

    I have no idea what mortgage lenders like to see but consolidation is rarely a positive move.
    Originally posted by January2015
    Because it would leave me with more "expendable" money at the end of the month?????
    Which I could potentially save and have available when the time came to buying a home. -
    Unfortunately I very much am asking specifically what would a lender like to see.

    In the short term I see this: the quicker I can buy a home, the quicker I WONT be paying 250 more per month in rent to my landlord than I would with a mortgage. (and waiting 9 more months to do that means i'm losing 2250)
    I am quite happy with just paying my current loan and card like normal, if that is the best option from the perspective of a mortgage lender that I have little cash extra available per month. As the advice i'm looking for is if having more or less expendable income would affect buying a home in the summer.
    I have seen loan providers with lower APR than what i'm currently paying, and would allow me to pay half per month - though double the term length - but if that could cause problems when trying to apply for a mortgage i'll forget about it.

    I'm just thinking about saving money in the long run
    • sourcrates
    • By sourcrates 13th Mar 18, 11:39 PM
    • 14,020 Posts
    • 13,278 Thanks
    sourcrates
    • #5
    • 13th Mar 18, 11:39 PM
    • #5
    • 13th Mar 18, 11:39 PM
    But it is very rare you would receive the advertised rate.

    Only about 1% of customers do.

    I think you would be best paying off what you owe first.
    I'm a Board Guide on the Debt-Free Wannabe, Credit File And Ratings, and
    Bankruptcy And Living With It, boards. "I volunteer to help get your forum questions answered and keep the forum running smoothly".
    Board guides are not moderators and don't read every post. If you spot an abusive or illegal post then please report it to forumteam@moneysavingexpert.com. Any views are mine and not the official line of MoneySavingExpert.com.

    For free debt advice, contact either : Stepchange, National Debtline, or, CAB.
    For Free Legal advice see : http://legalbeagles.info/
    • foxgloves
    • By foxgloves 14th Mar 18, 6:58 AM
    • 4,028 Posts
    • 20,723 Thanks
    foxgloves
    • #6
    • 14th Mar 18, 6:58 AM
    • #6
    • 14th Mar 18, 6:58 AM
    We had quite a bit of debt when we bought this house. At our appointment with the mortgage advisor, we were asked about our outgoings, including debt payments, for affordability. We got a mortgage with no problems but the amount of our outstanding debts was deducted from the total figure of the amount we could borrow. This didn't affect us, as it was sufficient to buy the house we wanted, but I'm just flagging this up as a potential reason why clearing debts first can be a good idea.
    Money can't jump out of your purse on its own so ask 'Can I borrow one, make one, grow one, bake one, re-purpose or recycle, acquire it for free?' Yes? Then put that purse away & keep your money because little savings grow!
    Loan pay-down fund instalment 2 = 716-58
    Payment received from surveys: 2015 = 320 2016 = 210 2017 = 304 2018 = 244
    • January2015
    • By January2015 14th Mar 18, 8:21 AM
    • 2,066 Posts
    • 5,145 Thanks
    January2015
    • #7
    • 14th Mar 18, 8:21 AM
    • #7
    • 14th Mar 18, 8:21 AM
    Because it would leave me with more "expendable" money at the end of the month?????

    I'm just thinking about saving money in the long run
    Originally posted by wezhayw

    In 9 months you will have even more 'expendable' money because your loan will be completed. Whereas if you consolidate you will have slightly more expendable money than you do at the moment, but quite a bit less than you will have if you wait 9 months and complete the existing loan term.

    Sorry but I cannot agree your logic. I understand it - because I've been there, done that, and sincerely regretted the decisions I made to consolidate.

    You are definitely not saving money in the long run. The numbers just do not stack up. What you are considering doing is extending the period of your existing unsecured debt.... not good.
    DFW Nerd No. 1484 LBM 07/01/15 Debt was 95k I'm driving it down
    1k emergency fund (member #84) 1k/1k
    [COLOR=Blue][SIZE=2]
    • fatbelly
    • By fatbelly 14th Mar 18, 8:23 AM
    • 12,239 Posts
    • 9,276 Thanks
    fatbelly
    • #8
    • 14th Mar 18, 8:23 AM
    • #8
    • 14th Mar 18, 8:23 AM
    I'd definitely go for clearing debt first so as to look as good as you can on your credit report. What lenders want to see is a clean report and some indication that you can handle credit.

    It sounds like the total debt is not large. Is there anything you can do to generate some cash, like downgrade a car or get help from family?
    • loken152
    • By loken152 14th Mar 18, 9:15 AM
    • 46 Posts
    • 70 Thanks
    loken152
    • #9
    • 14th Mar 18, 9:15 AM
    • #9
    • 14th Mar 18, 9:15 AM
    In 9 months you will have even more 'expendable' money because your loan will be completed. Whereas if you consolidate you will have slightly more expendable money than you do at the moment, but quite a bit less than you will have if you wait 9 months and complete the existing loan term.

    Sorry but I cannot agree your logic. I understand it - because I've been there, done that, and sincerely regretted the decisions I made to consolidate.

    You are definitely not saving money in the long run. The numbers just do not stack up. What you are considering doing is extending the period of your existing unsecured debt.... not good.
    Originally posted by January2015
    100 % agree with this statement. The number just don't add up, in the long run. Plus if you complete your current loan it proofs that you can complete an loan agreement in full.
    • Dobbibill
    • By Dobbibill 14th Mar 18, 10:00 AM
    • 3,053 Posts
    • 3,974 Thanks
    Dobbibill
    Don't consolidate - it's a bad idea.

    Use your savings for the deposit to pay off the debt - it's probably earning far less in savings than it's costing you in interest on the borrowing.

    How do you know you will be paying that much less than rent? Have you had the figures through? You may have a higher APR than hoped for due to your risk/debt.
    Please don't think that you don't need to utilise that difference either as you will then be responsible for the boiler/maintenance of the house as a home owner and that may cost you significantly more if you were to have a few things need attention at the same time.

    To bounce some figures about use your banks website - there are normally mortgage calculators on them which shows you the amount of borrowing available with/without the debt figures added. This will give you an idea of the impact.

    I agree with others - pay off the debt first - 9 months is not that long.
    I'm a Board Guide on the Energy, Student Money Saving, UK Armed Forces and
    Local Money Saving - Wales boards. I'm a volunteer to help the boards run smoothly, and I can move and merge posts there.
    Board guides are not moderators and don't read every post. If you spot an abusive or illegal post then please report it to forumteam@moneysavingexpert.com. Any views are mine and not the official line of MoneySavingExpert.com.


    It's not about being the best -
    It's about being better than you were yesterday.
    • rawr_
    • By rawr_ 14th Mar 18, 3:42 PM
    • 118 Posts
    • 478 Thanks
    rawr_
    Hello - I was in a similar position to you about 8 months ago - and me and my husband decided to use some of our deposit money to pay off my debt, as we worked out once that was paid it would only take X amount of months to replace that money, and we saved money on the interest.

    If you are really serious about buying your first home, my advice would be to go and see a mortgage advisor before you do anything. We went to see one where we bank, and you in no way have to use them, but it gives you a good idea of where you stand. We found it really helpful.
    Debt March 2018: 11,529.70 | Current House Deposit: 18,732.02 | #77 Save 12K in 2018: 1374.23 / 6000
    Comp Wins 2018: Easter Tote Bag & Egg
    • enthusiasticsaver
    • By enthusiasticsaver 14th Mar 18, 6:02 PM
    • 6,385 Posts
    • 13,110 Thanks
    enthusiasticsaver
    A lender will prefer to see you with no debt so definitely do not consolidate. How much of a deposit do you have for the house? It may be worth repaying the debt now with it and then you have the extra money to save up each month that you are currently using to repay debt.
    Debt free and mortgage free and early retiree. Living the dream

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • zippygeorgeandben
    • By zippygeorgeandben 14th Mar 18, 8:58 PM
    • 815 Posts
    • 1,048 Thanks
    zippygeorgeandben
    Please take a look at the sticky by zippygeorgeandben, aka me!
    I wanted more money at the end of the month but MSE community made me change my outlook and thinking!
    End Sep 2016 End Apr 2018
    8236.57 0
    (Tesco 4.8%) 0pcm
    6185.75 0(Zopa 4.0%) 0pcm

    5344.50
    1630.04 (Sainsburys 0% until 06/19) 140pcm
    2000.00 [B]266.71/B] (Sister 0%) 133.33pcm

    Total debt
    19.766.82 1896.75 Original DFD May 2019.
    • mumofthetwins
    • By mumofthetwins 15th Mar 18, 3:21 PM
    • 1,018 Posts
    • 4,005 Thanks
    mumofthetwins
    Please take a look at the sticky by zippygeorgeandben, aka me!
    I wanted more money at the end of the month but MSE community made me change my outlook and thinking!
    Originally posted by zippygeorgeandben
    Hi ziggy .. can I ask where the sticky is (sorry if I sound stupid !!!128522 ? Thank a million x
    DFW
    May 1885/23042
    April 1266.27/25843.54 STF 1500/1500
    NSD 7/15
    MFW OP 2018 400
    GC MAY 78.84/250 April 149.35/250
    • wezhayw
    • By wezhayw 22nd Mar 18, 11:21 AM
    • 3 Posts
    • 1 Thanks
    wezhayw
    Thanks for the feedback guys, house deposit is tied into two Help to Buy ISAs. The loan wasn't a huge amount as it was to buy a car and insurance early last year.
    I shall focus on bringing the debt down as much as I can in these next few months
    • Pixie5740
    • By Pixie5740 22nd Mar 18, 11:35 AM
    • 12,111 Posts
    • 17,045 Thanks
    Pixie5740
    But it is very rare you would receive the advertised rate.

    Only about 1% of customers do.

    I think you would be best paying off what you owe first.
    Originally posted by sourcrates
    Legally 51% of successful applicants must be offered the representative rate otherwise it wouldn't be representative.
    • Pixie5740
    • By Pixie5740 22nd Mar 18, 11:37 AM
    • 12,111 Posts
    • 17,045 Thanks
    Pixie5740
    I think you are over-simplifying the cost of renting versus the cost of owning. There's more to home ownership than the mortgage repayments.

    My advice would be to get copies of all 3 credit files and engage a mortgage broker.
    • enthusiasticsaver
    • By enthusiasticsaver 22nd Mar 18, 11:56 AM
    • 6,385 Posts
    • 13,110 Thanks
    enthusiasticsaver
    Thanks for the feedback guys, house deposit is tied into two Help to Buy ISAs. The loan wasn't a huge amount as it was to buy a car and insurance early last year.
    I shall focus on bringing the debt down as much as I can in these next few months
    Originally posted by wezhayw
    OK that makes sense then to keep the Help to Buy savings accounts untouched.

    I would focus on bringing the credit card debt down as quickly as possible before applying for a mortgage. By then the loan will be almost finished too so it may not affect your borrowing power. Applying for new borrowing before applying for a mortgage will send up red flags to your mortgage provider so I would not consolidate. Just do as you say above and focus on cutting as much as possible out of your outgoings to bring the debt down as low as possible before your mortgage application.
    Debt free and mortgage free and early retiree. Living the dream

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • Sncjw
    • By Sncjw 22nd Mar 18, 12:21 PM
    • 1,770 Posts
    • 1,049 Thanks
    Sncjw
    Do you regularly put money into the htb isa.

    I would just pay the debt off first before applying for mortgage. If you have recent credit applications when applying for mortgage that can be a worry for them.

    Also when you consolidate the debt your doubling the debt and the rate will be based on how much you owe in total not just the current debt as they don!!!8217;t know you will pay off the debt.

    I would start afresh when buying the house so
    You don!!!8217;t have the extra stress of paying your debts
    • Dobbibill
    • By Dobbibill 22nd Mar 18, 5:27 PM
    • 3,053 Posts
    • 3,974 Thanks
    Dobbibill
    Hi ziggy .. can I ask where the sticky is (sorry if I sound stupid !!!128522 ? Thank a million x
    Originally posted by mumofthetwins
    No need to apologise - It's at the top of the loans board.
    Here is the link to the thread
    http://forums.moneysavingexpert.com/showthread.php?t=5567669
    I'm a Board Guide on the Energy, Student Money Saving, UK Armed Forces and
    Local Money Saving - Wales boards. I'm a volunteer to help the boards run smoothly, and I can move and merge posts there.
    Board guides are not moderators and don't read every post. If you spot an abusive or illegal post then please report it to forumteam@moneysavingexpert.com. Any views are mine and not the official line of MoneySavingExpert.com.


    It's not about being the best -
    It's about being better than you were yesterday.
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