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Original poster

Loans and credit cards- how much do they affect how much you can borrow on mortgage

12 replies

slushypup · 12/10/2022 14:17

I have two credit cards, a student loan and a car loan. I can see the car loan massively affects the mortgage loan.
My thinking is to pay down the car loan with money Id set aside to pay down my student loan which is currently at about £11.5k then keep the student loan as this affects the borrowing less but repay the student loan after the mortgage using my then non existent car repayment loan.
Does this sound like a good idea?!
Then with credit cards, each bank seems to say they do or don't matter but I pay my credit cards off monthly without fail.

Do the banks still take the balance into consideration? If so which balance ie the current one, last three months?!

Trying to make sure I have perfect everything before applying for a mortgage.

Thanks

OP posts:

Thatsajokeright · 12/10/2022 14:34

In my very recent experience, the student loan and car loan were the biggest issues for us. (the total repayment for both was more than £650p/m!)

The other little debts (total of about 6k) were negligable. Halifax were less interested in the balance and more interested in the monthly cost.

Original poster

slushypup · 12/10/2022 16:03

Did they treat a student loan with equal weighting to the car loan?
And with the credit card how far back did they go? I'm thinking of stopping spending on the CC and start spending and 'paying back' out of my savings to stop the CC showing up. Want to up our budget for houses as our income will most likely go up eventually. Thanks for your help

OP posts:

Goldpanther · 12/10/2022 17:59

Hi OP,

We have car loans (£400pcm), personal loans (£750pcm), student loan (£495pcm) and credit card debt of ~£5k.

The loans impact our affability a lot more and our mortgage broker advised to pay those off/down. Apparently 3% of your outstanding credit card balance is generally used as a monthly commitment. They took the average balance over 3 months.

We still managed to get a high Street mortgage, and at 95% LTV.

I highly recommend speaking to a broker, instead of waiting for everything to be perfect.

satelliteheart · 12/10/2022 18:33

If you pay your credit card off every month they may not take it into account. We clear our full balance by dd every month and it's never been counted. Probably depends on lender. Student loan and car loan will have a big impact though

Nowheretoogo · 12/10/2022 18:53

we owed 15k on a car purchase,they deducted 15k from the amount we could borrow,that was natwest.

Shopgirl1 · 13/10/2022 00:44

If you pay off your credit card in full every month then it is unlikely to have any impact on how much you can borrow.

Lcb123 · 13/10/2022 08:40

Assuming your student loan is the government one - I’m not sure why you’d ever pay more than the monthly deduction? It gets written off so why waste money on it-pay other debt or save the money and get interest

Jarstastic · 13/10/2022 09:24

I’d stick to spending on your credit card though cut back on expenditure. you need a budget is a great tool.
if you stop your card and pay for everything from your card the lenders will see everything you spend on from your bank statements. I think they are mainly looking for gambling or ridiculous coffee habits and I have neither, but I don’t like people having information about me!

Original poster

slushypup · 13/10/2022 09:37

Ah thanks all. I'm still studying until end of this year so not repaying loan yet (post grad) but obviously watching the balance go up.

I think I'm ok at budgeting but I use the credit cards as they give me cash back so I spend absolutely everything on there but pay off every month and annually get a nice cash sum at the end.

What I'm really trying to work out how to maximise my borrowing capacity, not so I can necessarily buy up to that point but that if I see a property I really like then I know I can get it, I know I can get a mortgage it's the amount I can borrow I'm trying to maximise. I want to pay the student loan down as I hate having a monthly outgoing but maybe I'm wrong here, I think I will leave it though if it's the difference between getting a better house or not. The car was necessary but I'm now thinking to pay it off and borrow the 'cash' back through the mortgage as the internet rate would be lower, so put less deposit down.

Not enjoying these interest rates hikes but planning to keep the property in the long run so just going to try to get on with it all.

OP posts:

caringcarer · 13/10/2022 10:18

When my dd and sil got their mortgage they were told as they pay credit card off every month it was not counted. They did count students loans they were both paying off every month and that monthly amount was deducted from how much they could borrow. Banks/building societies look for regular commitments. A friend of my dh had his regular child maintenance payments for 2 children taken off what he could borrow.

Adj · 15/10/2022 20:57

I would ignore the student loan, pay off credit cards each month so they’re at 0. Also only use 30% of your balance each month on credit cards, shows that you’re not reliant on them. And also pay off as much of your car finance

Hels20 · 15/10/2022 21:43

If you pay off credit cards each month then they won’t be taken into account - we just remortgaged afford height of crisis with HSBC.

BUT they will want evidence of how you are going to pay off your mortgage if you go for interest only. We struggled to get HSBC to lend 3x salary. They have really come down hard. Hopefully it will ease in a few months.

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