Reader Question
Hi
Would switching some of my debts now to a 0% credit card adversely affect any mortgage application when I come to re-mortgage my property later this year?
Thanks
Matthew
Darren's Response
Hi Matthew
Actually lenders view this type of thing quite well, as it is a sensible thing to do....provided they can see that the other credit card accounts are then physically closed down of course!
It also depends upon the new credit limit, and current spending pattern.
For example, if you currently spend £500 each month, and pay off only £200 so your balance increases each month, what will transferring achieve? You would still be getting deeper in debt, just not quite so fast
On the other hand if you effectively stopped the spending, (or pay off more than you spend) and your balances have been reducing over the last 12 months then the switch to 0% will help reduce them even faster.
The lender can then see affordability shouldn't be an issue, which by later in the year will be their main concern under the new MMR rules of course.
For mortgage affordability purposes they would look at the balance as a monthly commitment of 3/5% of the current balance (not the reducing balance).
I hope that helps
Financial Planning Designer
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