I am trying to save up, pay off some debts and this time next year apply for a mortgage.
i have 4 credit cards with low balances (£300 or less)
I have 5 catalogues with balances ranging from £300-1000.
I have 2 bank accounts one with a £2500 overdraft and the other with a £1850 overdraft – both of which I live in the overdraft so balance is never reducing.
which should I prioritise in paying off? Catalogues/Cards and closing accounts or the overdrafts? I won’t manage to do everything and have savings behind me as well so curious which the mortgage company will frown upon more
This is a really good question, as often what is the cheapest (in terms of the cost to service the debt) is not necessarily going to lever the most in terms of affordability.
Unfortunately there is no exact science and much will depend upon the state of the world next year in addition to if you are going to need a specialist lender vs high street equivalent.
Overdrafts tend to impact affordability less, but a specialist lender would not like to see it being never use of any overdraft and especially not if highly utilising the overdraft.
The catalogues are likely to be costing more (and hitting affordability harder) and therefore these would be worth working on if you can.
If you can get any of the low card balances onto a 0% or lower interest rates this will mean paying the same will at least pay more off each month.
Well done for thinking about this now and best of luck with the move..
The one with the highest then the next one with the small fee.