Applying for a mortgage with credit card debt

Applying for a mortgage with credit card debt

author: Dan Griffiths

By Dan Griffiths

When you apply for a mortgage, the lender will look at your income and outgoings to see whether you can afford to make repayments.

This also means they will be able to see how much you’re paying on your credit card every month.  

Clear as much as you can before applying

Since the Mortgage Market Review in 2014, lenders have stricter rules on who they lend to. They want to make sure you’ll be able to pay your mortgage comfortably each month, and this is why your total credit card debt will play a part in their decision. That’s why it’s important to try and clear as much of your balance as you can before you apply.

If you have a high amount of outstanding debt, your mortgage provider might decide you’ll struggle to pay off any more and so think twice about lending to you – especially if your outgoings are a lot higher than the money you have coming in.

One option if you have more than one credit card with a large outstanding balance is to consider shifting the debts on to a balance transfer credit card. This means you’ll have just one payment to make each month rather than several, which should make it easier to manage. You can find out more about this here.

Cutting back on spending

To stand you in the best stead for bagging a good mortgage deal, it’s a good idea to plan how you’re going to reduce your credit card balance over a few months. You could do this by looking at where you could cut back on your spending to free up cash to put towards paying off your balance.

Big nights out, pricey restaurant dining and retail splurges are all things you could cut back on. The money you save here can be put towards repaying your credit card debt faster.

Your mortgage lender will look at your spending habits when you apply and could be put off if you appear to be spending a lot on what they would see as ‘luxuries’. So, cutting back on this before you apply puts you in an even better position to get a good deal.

If you have any savings, you could put some of these towards reducing your credit card debt. After all, you’ll probably save quite a bit in interest this way. But remember, if you’re going to be applying for a mortgage, you’ll still need to have a deposit saved up too.

Don’t stretch yourself

Although it’s important to try and bring your credit card debt down, it’s no use throwing all of your disposable income at it. Try not to reach a point where your finances become stretched and you find yourself cutting back on essential spending like food, bills and rent.

Good budgeting means trimming down spending on your non-essentials and putting the money you save to good use. You should always have enough money left over to cover your essentials.

Try not to cut out everything you enjoy in your spare time though, as this can affect your quality of life too. The occasional treat with your family is what life is all about, so it’s important to find a balance that’s right for you. 

Disclaimer: All information and links are correct at the time of publishing.

author: Dan Griffiths

By Dan Griffiths

Applying for a mortgage with credit card debt Applying for a mortgage with credit card debt