Should I pay off debt or save for a deposit first?

Short answer: Pay high-interest debt first (credit cards). Keep low-interest debt (student loans). Less debt = bigger mortgage.

What this actually means in plain English

Pay off high-interest debt first. Credit card debt at 20% costs more than mortgage interest at 7%. But keep making minimum payments on low-interest student loans. The bank also cares about your debt-to-income ratio. Less debt means you can borrow more. Do the math on interest rates.

Key Facts

Credit card debt: 18-25% interest — pay off first
Student loans: 0-5% interest — minimum payments fine
Less debt = better debt-to-income ratio
Better debt ratio = can borrow more
Banks assess total debt, not just deposit

Example

Credit Card Debt: $5,000 at 20%

Student Loan: $20,000 at 3%

Recommendation: Pay off credit card first

Reason: Saves $1,000/year vs $600/year on student loan

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