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Original poster

Saving for 1st mortgage deposit with some credit card debt

33 replies

itsausername · 06/07/2017 18:53

Is it better prioritising adding more to the savings pot or clearing credit card debt?

Currently we are working away at both - Have savings of around 8k and each have 2k on credit cards (0%percentage).

We both earn circa 30k and are looking to buy our first home, most likely with a 5% deposit. DH and I are currently staying at his parents to help boost the savings. We have been at parents for a few months which is ok but obviously don't want to be here much longer, so looking at the most efficient way of saving/cutting debt which will make us appealing to lenders.

We have an appointment with a mortgage advisor in the coming weeks but just wondered if anyone had any experience/advice on what should take priority.

OP posts:

scaredofthecity · 06/07/2017 19:00

I don't think you'll get a 5% mortgage with cc debt. They are pretty difficult to get at the best of times.
We stayed at my parents whilst we saved so I get how rubbish it is! can you get a second job or overtime? Have you cut back on spending as much as possible?
Don't forget about money for fees as well. Ours came to about 3k incl. stamp duty (which i think it's fairly modest)

scaredofthecity · 06/07/2017 19:02

In fact I'm pretty sure as ftb you can't really had any debt, I think this changes when you remortgage and are no longer ftb.

good luck btw, getting on the ladder was one of the hardest things we did but so so worth it.

RoseVase2010 · 06/07/2017 19:04

Pay off the debt and then save, your losing money otherwise and if you owe more than 50% of the available balance you'll be effecting your credit rating, CC payments will also be taken into account for affordability calculations.

snapple21 · 06/07/2017 19:07

We are currently going through the application process for the 5 percent deposit scheme. I have 1300 on a credit card and my other half has a 5 grand loan. The mortgage advisor seems to think we will get accepted. I'll let you know!

DancingLedge · 06/07/2017 19:08

Recommend Martin Lewis Money Saving Expert, who can explain way more clearly than I ever could that it's very probably, depending on exact details, a pretty bad idea.

HipsterHunter · 06/07/2017 19:10

You're bringing in £60k gross, have no rent to pay and you've only got net £6k? I think I would look at staying put for a few more months and saving a bit more.

PickANameAnyName1 · 06/07/2017 19:16

What they said ⬆

whereiscaroline · 06/07/2017 19:17

I got onto the ladder with around £7k debt, whilst earning £25k. It was all on 0% for fairly long terms. So it can be done, but that was back in 2013.

whereiscaroline · 06/07/2017 19:17

Should add - that was with a 5% deposit, and using the Help To Buy scheme.

Original poster

itsausername · 06/07/2017 19:18

I think really we know it makes sense to wait a bit longer. We've really only properly starting saving in the last few months after having quite a bit of credit card debt and high rent and other outgoings.

We're lucky to be able to stay here for a time paying £300 a month to in laws to contribute to household.

It does feel a bit like life is on hold after having lived together for years just the two of us. We have no parents/grandparents adding to our savings pot so ebbing away as we can. Hopefully it will be worth the slog.

OP posts:

Ecureuil · 06/07/2017 19:19

In fact I'm pretty sure as ftb you can't really had any debt, I think this changes when you remortgage and are no longer ftb

We got our first mortgage very recently with a loan debt. It wasn't an issue at all, it was just taken off the amount we could borrow overall.

Ecureuil · 06/07/2017 19:22

Having said that, better to get rid of the debt first if you can.

Original poster

itsausername · 06/07/2017 20:03

Interesting that some have got ftb mortgages with debt. I suppose it's all down to individual circumstances. There seems to be quite a few banks offering 95% mortgages at the moment.

Will most likely hang off for a few more months at least; will be interesting to hear what mortgage advisor says. Thanks for input and thoughts.

OP posts:

HipsterHunter · 06/07/2017 20:08

You can usually get a mortgage with debt,, if you have a good credit rating. But it just gets deducted off the amount they are willing to lend, plus some allowance made in the affordability criteria for repayments which reduces the amount they will lend.

So you will be able to borrow more if you have £6k of svings than £8k savings and £2k debt. Probably.

Ecureuil · 07/07/2017 06:25

It helped that we weren't looking to borrow anywhere near the maximum we could borrow based on income, so it didn't matter that it was taken off our top line.
We had a 10% deposit but the mortgage advisor said we could have got a 95% mortgage with the same debt if we'd wanted to.

PeachesandPie · 07/07/2017 06:34

We got our mortgage a couple of years ago with a loan and credit card debt. We had a 10% deposit. The debt wasn't an issue at all, they just calculate it as part of The affordability - if you can afford the mortgage repayments on top of the monthly debt repayments there shouldn't be a problem. Obviously how much you are looking to borrow impacts this as the more you borrow the higher your repayments will be. So simply, if your mortgage will take you to the top of your budget then you need to clear the debt first, if you're borrowing a more modest amount compared to what you are allowed then just focus on building your deposit.

Ecureuil · 07/07/2017 06:41

As a PP says, don't forget to take stamp duty and fees into account. Ours came to approx £7.5k

darceybussell · 07/07/2017 07:15

My mortgage advisor told me not to pay off my 0% credit card because he said they will just assume that you need to pay x amount per month and take that into account for your affordability, and that way you get to keep the lump sum in your savings which for me he said was a better outcome.

To be honest the interest free period came to an end so I paid it off before I actually bought the house, so it was irrelevant in the end!!

Fairylea · 07/07/2017 07:25

There's no point having savings and credit card debt at the same time. Use the savings to pay off the debt and then start saving again.

Bigfatpicnic · 07/07/2017 07:33

It is better to pay the debt off and put yourself in a position to get the best mortgage deal you can. The less debt you have, the bigger deposit you have, the cleaner your credit file = better mortgage deals and packages available to you.
You'll be paying a mortgage a long time, so position yourself to make sure you will be eligible for the best deals and incentives in the first instance.

sandgrown · 07/07/2017 07:39

Hey Scared. We invited DSS and his partner back to live with us while they saved a deposit. Didn't realise it was that bad. We thought we were doing them a favour !

sandgrown · 07/07/2017 07:40

My DS trying for a mortgage at the moment. I would say clear the CC debt first.

RedSandYellowSand · 07/07/2017 07:48

How much is the interest on the debt?
How much is the interest on the savings?

Put the money into the one with the higher interest.

Ecureuil · 07/07/2017 08:00

sandgrown we lived with the IL's once to save some money. We were very appreciative as they were doing us a favour, but obviously we would rather have had our own house.

thatstoast · 07/07/2017 08:16

Based on your figures you're looking at a house worth 80k, will you get something for that?

As the cc is interest free I would keep it as your income compared to the amount you'd want to borrow is high.

You wouldn't pay stamp duty so other fees would come to about 1.5-2k.

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