Reduce Debt to Improve Mortgage Affordability
Every pound of monthly debt reduces how much you can safely put toward a mortgage. Trimming balances before you apply can lift your borrowing power and lower the stress of homeownership. Here’s how to plan repayments and model the impact with the HouseBudget Calculator.
Why debt matters for mortgages
- Lenders deduct debt payments from your income before calculating affordability.
- Higher credit utilisation can lead to tighter lending criteria or higher rates.
- Stress tests assume debts continue, so clearing them can unlock a larger buffer.
Prioritise which debts to clear
- List all balances and monthly payments for cards, loans and car finance.
- Target high-rate or short-term debts first, as they hit affordability the hardest.
- Consider whether early repayment fees apply to any loans before clearing them.
- Keep some savings back for emergencies so you don’t need to re-borrow later.
Use the calculator to see the gains
- Enter your income, debts, rate and term into the HouseBudget Calculator.
- Note the suggested monthly payment and estimated mortgage size.
- Reduce the debt field by the amount you plan to clear and re-run the numbers.
- Compare the new mortgage estimate and stress payment to see how much buffer you unlocked.
Habits that keep debts down
- Automate payments above the minimum on credit cards until they are cleared.
- Pause discretionary spending for a short window to accelerate repayments.
- Avoid new finance agreements before applying for a mortgage.
- Once debts fall, redirect the freed-up cash into savings or overpayments.
Balancing debt freedom and savings
Clearing expensive debts usually beats boosting your deposit, but keep a modest safety fund so you don’t need to rely on credit again. A lighter debt load makes approvals smoother and keeps your future mortgage payment within a comfortable range.