Mortgage & 0% interest credit

[Bedtime91]

Hi,

If everything goes smoothly with our offer on a new house we'll be looking to apply for a mortgage in the next month or so.

As I'm at the end of my maternity leave (without pay) I decided to use a 0% credit card for everyday spending and keep my savings where they are earning 4% in interest. I have not spent more than my savings on this credit card and could pay it off today, but I'd rather keep the cash earning interest. The balance is about £3.2k (part spent on a holiday, but as mentioned I have the cash to cover it)

So, does a mortgage application take this into account or is it a case of credit=bad computer says no.

We'll be porting our current mortgage and borrowing extra so it's not a case of finding a helpful broker as well need to stay with our lender.

Any advice or experience much appreciated :)

If you didn’t know- this has a name! “Stoozing”. That might help you finding advice, as I’ve definitely seen posts on Reddit uk personal finance / mortgage boards about stoozing and mortgages. I think the general advice is don’t make any new applications for cards in the lead up to getting a mortgage but I’m a bit hazy on whether the actual fact of having the card loaded is a problem. (I stooze with 0% cards, currently about £12k on two
cards, but have only had to remortgage with the same provider so no credit check). The other issue is how much of your available credit you’re using. If your limit is £3500 and that’s your only card then it might be worth paying some off to reduce your % utilisation . Otherwise, I wouldn’t imagine £3200 would be a big deal especially if you’re back at full pay when you apply, but worth doing a bit of research.

It depends on your credit score, have you checked it?

With regards to the debt, the repayments are factored into your affordability checks, it doesn’t matter that you could pay it off in full, if you haven’t and are paying monthly then that monthly payment reduces the amount you can borrow.

I spoke to a broker about this last year. Lenders generally like to see you using 1/3rd or less than the card limit, and it looks best if you pay the balance off in full monthly.

I do exactly the same for the same purposes (who are you with? I get 4.6 with Investec instant access, tho it’s going down shortly).

We have good credit scores and affordability and the broker still advised this.

Thanks everyone - I think I'll pay it off to save the aggro and then just tighten my purse strings until I get paid again!

@KievLoverTwo that's good to know as DP has some too for a specific purchase that he's paying in Installments but well below one third of the limit. My account is with Monzo, 4.3% I think but it's going down soon too. I'm not so bothered as I've run the savings down anyway!

FYI, the advice we were given was on a first purchase.

From reading previous threads on here, I was under the impression that the main reason people don’t switch lenders is because if they go for a new product with their current lender, they seldom do affordability checks.

Don’t quote me on that though!

@KievLoverTwo oh interesting! We've had to do a decision in principle for the total amount of lending, but maybe they're a bit more relaxed after that.

Reason we are not switching is because we can't give up our 1.8% rate which we've got for another three years. Locked in two days before the mini budget I cannot believe my luck!!

A lender only doesn't do checks if its just a product switch as this is a posting application it will be fully underwritten as a new application.
Minimal credit card debt is rarely an issue as long as within limit, payments are being made on time and no cash advances are being taken out.
It will be included in affordability though.
If we didn't lend to people with unsecured debt we'd have no customers!!
Rarely do I see a case these days where there's no debt at all

@Jmaho when you put it that was it makes sense!

Affordability matters as it's a renovation so we need all the cash we can get 🫣

I really wouldn't worry, we took out a £10k car loan the month before we applied for our new mortgage. We just had to declare it as a monthly expense.