Pay off 0% credit card or keep savings higher...

TNGL

TNGL

TNGL

Soldato
Joined
2 Jul 2010
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3,098
... given I plan to soon apply for a mortgage?

Will it make getting a good mortgage easier if I pay the 0% credit card off by dipping into my savings? Or will I be in a better position if I show I have higher savings (and an amount on the 0% credit card)? Or, will it make no difference whatsoever?

I have around 4% of my gross salary on the credit card and just repay the minimum each month. My initial plan was then to clear it or roll it over to another 0% card. The balance on this card only ever decreases.

The OH thinks it makes more sense to clear the credit card in this case. However, to me it is free money at the moment but if clearing it means we could get a slightly better mortgage, then I no longer see it as free money because there would then be some value associated to clearing it/cost associated with keeping it.
 
The bank would like to see you have no debt, and might ask you to pay it off. It depends how large the credit card balance is, if it’s a few hundred they might not care vs say thousands.
 
Raymond Lin said:
The bank would like to see you have no debt, and might ask you to pay it off. It depends how large the credit card balance is, if it’s a few hundred they might not care vs say thousands.
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It's 4% of my gross salary (guessing they look at these things relatively than absolutely) but yes a few thousand on the card. I do have a car on a lease though and so perhaps it would just help my case by paying the card off?

elrasho said:
Mortgage lenders wont be bothered as long as you've never had any late payments. Do whats best for you
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I've ever had a late payment on anything.
 
When looked into a mortgage a few months ago, speaking to Barclays and a broker, they both asked about what other loans I have, including credit card. Mine also is on 0%, I have a DD set up to pay it off £100 a month so it gets paid off before the 0% period ends. They both wanted to know when that is because they need to know what your outgoings are. That's my experience anyway.
 
Raymond Lin said:
When looked into a mortgage a few months ago, speaking to Barclays and a broker, they both asked about what other loans I have, including credit card. Mine also is on 0%, I have a DD set up to pay it off £100 a month so it gets paid off before the 0% period ends. They both wanted to know when that is because they need to know what your outgoings are. That's my experience anyway.
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Yep hey just wanna make sure you can afford the mortgage with your current debts and usual outgoings. If you have £XXX left over each month you should be fine. If it's a joint mortgage with both parties in employment then it makes it easier.
 
THe bank will consider your overall position. Moving money around which then nets itself off won't make any meaningful difference in terms of mortgage; only make those changes if they benefit you directly (which they most likely will not).
 
What matters is your earnings. How stable your income is.

The amount you want to borrow.

And your dedicated outgoings.

If you have easily managed debt it's not a bad thing. What they don't like to see is gambling history, unmanageable debt like missed payments, etc. Anything that makes you riskier in their eyes.

I wouldn't worry about it if it's 2 weeks wages. Unless you have a lot of other dedicated outgoings like mobile contracts, car leases, insurance premiums, etc which are relatively high compared to your income.

They take a full picture they wouldn't look at one thing like a credit card and write you off.
 
Dirk Diggler said:
Isn't it bad to transfer a balance that was previously transferred between 0% offers? I think I read that somewhere but could be wrong.
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I haven't heard that before. Could be some truth behind it though?

Psycho Sonny said:
What matters is your earnings. How stable your income is.

The amount you want to borrow.

And your dedicated outgoings.

If you have easily managed debt it's not a bad thing. What they don't like to see is gambling history, unmanageable debt like missed payments, etc. Anything that makes you riskier in their eyes.

I wouldn't worry about it if it's 2 weeks wages. Unless you have a lot of other dedicated outgoings like mobile contracts, car leases, insurance premiums, etc which are relatively high compared to your income.

They take a full picture they wouldn't look at one thing like a credit card and write you off.
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Just a car lease and a £10 per month sim only contract that are on credit. All always paid off in time, no gambling history, able to save around 2/3rds of what I earn per month (WFH has helped get to this point though). Income is thankfully quite stable, no idea about the bonus element because I only started this role in April.

Whilst I'd hope they wouldn't write me off, I wouldn't want them to look at it and bump the interest rate up for instance because I'm subsequently viewed as a higher risk.

elrasho said:
Yep hey just wanna make sure you can afford the mortgage with your current debts and usual outgoings. If you have £XXX left over each month you should be fine. If it's a joint mortgage with both parties in employment then it makes it easier.
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Yes it would be a joint mortgage and so I definitely see that working in our favour. As above, I'm fairly certain we'd be able to afford the mortgage, I just want them (prospective lenders) to be (fairly) certain we can too.
 
I have no idea where a lot of posters are getting their information from, but in my experience, I was asked by my mortgage provider to pay off my credit card debt and it was actually a term on my mortgage offer. A specific term even stating the amount. It wasn't even a large amount either, it was £400 or so and was work expenses that the business would be paying me back (we didn't have corporate cards until recently).

Now they didn't actually ask for proof I paid it off but they asked none the less.
 
TNGL said:
I haven't heard that before. Could be some truth behind it though?



Just a car lease and a £10 per month sim only contract that are on credit. All always paid off in time, no gambling history, able to save around 2/3rds of what I earn per month (WFH has helped get to this point though). Income is thankfully quite stable, no idea about the bonus element because I only started this role in April.

Whilst I'd hope they wouldn't write me off, I wouldn't want them to look at it and bump the interest rate up for instance because I'm subsequently viewed as a higher risk.



Yes it would be a joint mortgage and so I definitely see that working in our favour. As above, I'm fairly certain we'd be able to afford the mortgage, I just want them (prospective lenders) to be (fairly) certain we can too.
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They can't bump up interest rate on mortgages like that.

You either get accepted or are rejected.

You can fill out a form on their website which is an agreement in principle so long as you answer every question truthfully this will tell you how much they would be willing to lend you.

If the mortgage is higher than that amount you will be rejected.

I had credit card debt which is paid off every month in full. They never batted an eyelid at it.
 
I'm in a similar position of wanting to get a mortgage at some point and having a few credit cards to pay off. Everyone I know that has a mortgage said it's better to pay off the credit cards first as they ask for that information.

My numbers are a bit bigger though, got about £20k left to pay off :p although every month after expenses I have about £2k-£2.5k just for cc payments. Can't wait to bank that money every month instead!
 
I used a advisor when I applied for my mortgage back in 2017. He asked what credit cards I had and how much is on them. I was in the same boat as you where I had 1 0% card with what I thought was lot on (between £1,000-£2,000.) In his words: “That’s nothing, they normally only start to worry if it’s £10,000+ or you’ve been missing payments”

I ended up not paying off the credit card and it didn’t have any effect. The ratio of your amount owed vs your salary will play into consideration as to whether the debt is of concern or not.
 
Just ignoring everything for a second, are you even getting a return on your savings? Or that debt even?
Kill the debt. Imagine if something essential broke, you had no savings as they were now equity in a house, and you've still your CC debt around.
Bank asked me about CCs, they didn't ask anything more when i said it's paid off on DD at full amount every month.
 
TNGL said:
I haven't heard that before. Could be some truth behind it though?
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Presumably because you'd end up paying a 1-3% fee to transfer the balance so it then makes it not 0%

For your original question, i had a 0% credit card balance and got a mortgage fine. As mentioned as long as everything is affordable for you then it shouldn't be a problem.
 
I got a mortgage recently and we agreed that I'd pay my debts off before the deal went through. I think it's probably a box to tick for the very best deals but then I'm no mortgage broker.

Mine was a few hundred and the mortgage was with HSBC - the same provider I had the debt with.
 
Don't think it'll be an issue if it's only a few grand, as mentioned above it's when it's into the £10k+ and there's missed/late payments that they get concerned.

I'm sure there's at least one mortgage broker/underwriter on here who could confirm btw.
 
TNGL said:
I haven't heard that before. Could be some truth behind it though?



Just a car lease and a £10 per month sim only contract that are on credit. All always paid off in time, no gambling history, able to save around 2/3rds of what I earn per month (WFH has helped get to this point though). Income is thankfully quite stable, no idea about the bonus element because I only started this role in April.

Whilst I'd hope they wouldn't write me off, I wouldn't want them to look at it and bump the interest rate up for instance because I'm subsequently viewed as a higher risk.



Yes it would be a joint mortgage and so I definitely see that working in our favour. As above, I'm fairly certain we'd be able to afford the mortgage, I just want them (prospective lenders) to be (fairly) certain we can too.
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You say you save around 2/3rds of what you earn a month but keep transferring your credit card balance between cards? This doesn’t make sense. Use your monthly savings and pay off your credit card. Once that’s paid off then start saving again? I really don’t get your logical thinking as the lenders will see a debt as a debt. Regardless if it’s 0% interest or not.

Hope this helps
 
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