- March 2, 2024
- Posted by: legaleseblogger
- Category: Related News
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### Financial Situation Overview
My partner and I currently hold a joint mortgage with approximately 360k left to pay off on a property valued at 435k. Our total combined income amounts to around £130k, with me working freelance and my partner in a full-time role earning close to 100k. Despite having no other active debts, my partner has completed the payment of their student loan, while I am still in the process of paying off mine.
### Current Financial Challenges
Last year, we purchased the flat and utilized a credit card under my partner’s name to fund the refurbishment costs. At the time, my income was minimal, which made it challenging for me to secure financing. As of now, we are in a position to pay off 10k of the credit card balance within the next three months, with the intention of settling the remaining amount by the end of the year. Our strategy involves placing funds into a savings account monthly and making minimum payments on the credit card until the 0% interest period expires in March 2025, at which point we plan to clear the entire balance. While we have sufficient savings to pay off the credit card in full immediately, we are considering the option of maximizing cash by keeping it in a savings account until the end of the 0% interest period.
### Concerns Regarding Remortgaging
One key concern that has arisen is the potential impact of carrying an 18k debt on the credit card on our ability to remortgage in August. We seek advice on how this outstanding debt may affect our mortgage prospects and whether it is advisable to proceed with our planned repayment strategy.
### How AI Legalese Decoder Can Help
AI Legalese Decoder can assist in clarifying any legal or financial terminology related to our mortgage situation, providing insights on the best course of action to take. By using this tool, we can gain a better understanding of the implications of our current financial decisions and make informed choices regarding our repayment strategy and future mortgage plans.
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Yes, 18k of credit card debt will have an impact on mortgage offers. The interest rate does not matter much to the mortgage companies – only the amount owed.
They will notice it, if it matters or not is all to do with your current outgoings
If you go about applying to a new lender then yes, they will pay attention. However, if your current lender allows you to switch to a new product at the end of the product term then there will be no issue.
The system is opaque, and how it affects things will depend on the lender, and the specific underwriting model in play. In general, they will all see this, as it’s on your credit file and it affects your affordability calculation.
The extent to which any might consider 20k a problem debt is the real question. They won’t be modelling it as 0%. If you clear that 10k of it, I probably wouldn”t worry about that though.
If you get a good mortgage advisor they can actually speak to the underwriters. They will also understand the models quite well and who this is likely to be a problem for.
Absolute worst case is you go onto the standard variable rate for a couple of months while you clear it right. I don’t think it should come to that at all though.
Edit: Ps there is an r/mortgageadviceuk sub – you could post there
Related question, assuming combined income is 3x mortgage (I.e well within affordability calculations) outstanding, and all non-mortgage debts less than 10% of mortgage, would you expect this to increase interest rates on mortgage compared to the same scenario with someone else without said debts?
What matters most is how much is the monthly payment for this CC debt.
In all walks of financial life, liabilities (outgoings) are subtracted from assets (money makers, or secured items) to give you a result, which is used as our affordability.
┬ú18k in credit card debt is ┬ú18k of liabilities, which will impact affordability. Financial assessments of risk on a person or persons include that liability and the standard ‘what if’s’ in life.
In the simplest of calculations, you have £130k of joint income. This is now £112k because of the £18k debt, before any additional detractors to affordability, like mobile phones, TV license, costs on clothes, toiletries, food, council tax, insurance etc.
Edit:
This is not a problem if lets say the bank offers you 4x the joint income of £112,000 for a max possible mortgage of £448,000, and you only need the £360,000.
I think youÔÇÖre getting a lot of misleading advice here.
The credit card debt will impact affordability assessments at new lenders (there is no check if you stay with the same bank). However it sounds like you are well within affordability anyway, so unlikely to make any difference.
Also you can apply for a remortgage offer 6 months before your renewal date, so you can know in advance if itÔÇÖll be an issue and can always pay it off if it is.
I had more on 0% cards than you have at my recent remortgage, and it had no impact. 5 year fixed term offer at 3.79%.
Hi /u/hotdogcool_123, based on your post the following pages from our wiki may be relevant:
– https://ukpersonal.finance/credit-cards/
– https://ukpersonal.finance/mortgages/
– https://ukpersonal.finance/savings/
– https://ukpersonal.finance/student-loans/
– https://ukpersonal.finance/tax-traps-and-tax-efficiency/
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^(These suggestions are based on keywords, if they missed the mark please report this comment.)
Not exactly hard and fast rules but:
– using over 75% of your credit will negatively impact your credit.
– using under 25% of credit will positively affect your credit (or not be considered an issue at least)
Every lender is different, but this is a rule I keep in mind.
Pay it the credit card today
You will automatically roll onto the (probably punishing) Standard Variable Rate Mortgage – that shouldn’t involve a credit check. However the debt will affect both your affordability (if you will get a mortgage) and credit (your interest rate) – so you may not be able to get another good fix until it is cleared. SVR usually come without exit fees so if you cannot clear it in time, you will get some months at a higher rate is all.
If you are staying with the same lender then they do redo affordability checks. So you should at least be able to do that unless you are with a specialist lender. 
If you have CC debt essentially you don’t have savings. And yes it will affect the % interest and who will offer/reject your remortgage application
Based on your comments about bills… and what you theoretically have left each month, if you don’t want to use your “savings” you need to go bare bones on spending. Only pay bills and groceries, no going out, no clubs or hobbies etc and put every other penny into the CC to pay it off.
It’ll suck for a few months but it’d only take you a hard 3-4 months to do it this way if what you’d stated is true. Or do half your savings into CC and then 2 months hard core paying off or a softer 3-4 months.
I had 20k on a credit card. 30k in personal loans. I got a ÔÇ£product transferÔÇØ I.e. Halifax just offered me their best rate. For another 5 years. If I wanted to peruse the market IÔÇÖd probably be screwed.
Depending on who youÔÇÖre with we just renewed with our existing lender, they carried out no affordability or credit checks, I just selected a new product in the web portal. The rate for existing customers was better than anything available on the open market anyway.┬á
Who did you get the credit card through?
IÔÇÖve been hearing of people getting very small credit limits with the 0% deals, but yours seems decent compared to income, so wondering who it is with?