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

[TNGL]

... 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.

 

[TNGL]

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.

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?

Mortgage lenders wont be bothered as long as you've never had any late payments. Do whats best for you

I've ever had a late payment on anything.

 

[TNGL]

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.

I haven't heard that before. Could be some truth behind it though?

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.

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.

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.

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.

 

[TNGL]

Interesting perspectives in here.

I think in the grand scheme of things, based on the above, a few K on a credit card that I pay off on time each month and have never missed a payment on shouldn't be a problem. However, it could make life easier if I did just pay it off.

Our mortgage would be 3x annual earnings before bonuses and so it isn't as though we'd be really trying to stretch to the x4.5 area, where this CC debt could have a large impact. E.g. if the debt took 10k off what we could borrow it wouldn't be an issue, whereas taking 60k off in @touch 's case might make a dent.

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.

I would still have savings because I've always liked to have a cushion for the unexpected. However, this cushion would be smaller.

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

I've transferred it once, no fee for doing so. Just didn't see the reason to pay it off if I can get 0% on it.

 

[TNGL]

We'd be borrowing around 3x earnings and so not stretching it to x4 or x4.5 and so hopefully a few thousand on a credit card wouldn't make a great difference?. I could pay the card off and still have enough for my deposit but I don't want to unless I know it's going to benefit me in getting a mortgage.

Point taken though, many things to consider and best to just ask the advisor/broker to... advise.

 

[TNGL]

So the adviser has provided his advice. He erred more on the side of paying it off once it gets to the application stage but didn't expect it to have a big difference.