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I have £7000 in credit card debt and really want to move home. I have around £1000 equity in my current property and I'm unsure if I should be saving like mad for a deposit or pay off my credit cards. All of my cards are on low rates for the life of the balance so not out of control interest wise.
Please help!
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879It is going to take you some time to save up for a deposit. Quite possibly as long as the balances would last.
If you saved up, your net savings rate would presumably be less than the rate on your card balances, so it would be better to pay off the balances quicker and then save for the deposit.
However, you mustn't relax once the balances have been paid off. Keep up the same rate of payment but to a savings contract instead of your cards. You can get better rates for regular monthly savings, but you need to check around carefully when the time comes.
Mike
Posted on 03 June 2012 |
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0 879You are going to need at least 10% of the new property plus all the costs of buying and selling (Legal, Stamp Duty, Estate Agents, Mortgage, etc) less the amount of equity you have. That will be a lot more than £10,000 I presume, so it is likely to take a while.
If that would be after the CC debt is paid off then the choice should be based on higher net interest rate.
If the CC debt would not be paid off by then, you might have a higher deposit by not paying off the CC debt but any remaining CC debt would reduce the amount of mortgage that you could obtain.
Mike
Posted on 03 June 2012 | Love 0 loves
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0If you are ill at ease with your money and your debt then you should pay off the credit cards. However you need to consider how a mortgage lender will react to your circumstances. Will they take the credit card debt into account when calculating an advance or will they ignore it?
Maybe you should talk to your preferred lender and get some idea of how they think. The route you take should be the one that puts more money on the table for your new house. Paying off the credit card debt may stop you getting the house you want. Talk to a lender.
Posted on 06 June 2012 | Love 0 loves
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0Its always best to stay within ones means (easier said then done!). Currently it feels as though your not in a financial position to save.
I would pay off the CC first and then save. However in order to be successful in this approach and pay off the CC debt quickly, would need to adopt a strict regime. This would involve controlling my spending (eating out less, cooking food at home, making packed lunches, etc).
Posted on 07 June 2012 | Love 0 loves
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58I would agree that the CC debt should be paid off first. If this means sacrificing the home you want for the home you can afford then so be it.
The extra interest you pay by getting a mortgage at a higher rate (for less deposit) will most likely outweigh the gains by appearing as riskier to the bank anyway (with £7k CC debt).
As has also been pointed out, the lower CC rates will probably disappear before you can either pay them off or save up enough deposit. Don't rely on being able to obtain another good deal once they end.
Posted on 07 June 2012 | Love 0 loves
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43Get the mortgage and transfer the balance on your credit card(s)
Posted on 08 June 2012 | Love 0 loves
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74I would advise a programme of strict austerity coupled with paying off your CC debt as soon as possible. Once you have done that, make sure that you are ALWAYS able to clear you CC debt in full at the end of each month. Credit card debt leads only to problems (and other people making money from your hard work).
Once you have cleared your CC debt your cash flow will increase which will enable you to pay more on your mortgage. I am assuming that house prices will not increase whilst you do this. This is a reasonable gamble, but don’t wait too long!
Advantages:
• credit record looks better
• more money to pay the mortgage
• your monthly outgoings are reduced
Buying a property results in substantial monthly costs (as does renting a property), therefore the real benefit comes only when the mortgage is paid off. You then get to live rent free (although you do have to maintain the property!). So pay off your mortgage as soon as you can.
I have applied both of the above principles and it has worked very well for me.
Over the last three generations of my family, various investments have been made. By far the best ones were in property.
Good luck
Posted on 09 June 2012 | Love 0 loves
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