Ask a planner answers: To Buy or Not to Buy (when in debt)?

Tuesday, June 7, 2016

The question from Anon.

My partner and I now have some spare cash each month. We have approx. £12,000 of debt, and would like to buy our first house in the next 2-3 years. Do we need to clear our debt before saving for a deposit? Will having debt reduce our mortgage options? or should we arrange a longer-term, lower repayment loan for the debt which will enable us to start saving our deposit now?

Answer from Stuart Dewin CFPTM of Questa Chartered

In the first instance, you should meet with a mortgage advisor to discuss your affordability options, with or without the unsecured lending. All lenders now have their own affordability calculations, which include looking at factors such as income, commitments, age, number of children and amount of deposit available. These elements are used to confirm the maximum lending available and the affordability.

In the meantime I would advise that you start saving with a Help to Buy ISA and also overpay your debts with any spare cash you have available, as your lending options will then greatly improve without debt.

Stuart Dewin CFPTM
Questa Chartered