Loan stopping me getting mortgage

tc83

I want to move house but I'm having a problem getting a mortgage for the amount I need.

The problem is I have a loan (with Barclays) which I pay £328 p/m. I owe around £10-11k and have three years of repayments left.

I can afford this as well as the monthly repayments for the amount I want to borrow for the mortgage however the bank doesn't agree and will only lend me what I need if I don't have the loan repayments.

Any ideas how I can get around this? I did think my Parents could lend me the money to pay the loan off then I could pay them back in cash but this is not an option now.

Other things that may be relevant are I owe £128k on my house, it is worth £150-155k and the house I want to buy is £180k. I have £0 savings.

Thank you

1DayAAT

When I was applying for my mortgage I had a Sainsburys loan and was told by my FA that they don't look at how much you owe over all, but just your monthly committment level. What I suggest is perhaps you have had your loan for a while, you can make an adjustment to the loan terms and have it running for a longer time, to reduce the amount you have to pay each month. That might make a difference but obviously depends on how your loan is set up and if they are able to make adjustments to it (most have to have 8 months of clear payments before they will let you change things I think).

My monthly loan payment was £100 a month and didn't affect my application at the time, but I had no other debt. Good luck with this.

Matt_ftb

Look at it from there point of view.

Is your current mortgage you've not been able to achieve any savings and have needed a loan. You now want a bigger mortgage, if you can't afford to save then how are you going to pay the bigger mortgage?

dgtazzman

I quite agree with the bank on this one, unless your wages are in the 70k region. After costs etc you will be lucky to have enough equity to get a 10% deposit, you have no savings (how did you imagine you were going to pay stamp duty, conveyancing fees, moving costs, etc.?). You have a loan that is costing over 300 pounds a month (which is about half of what your new mortgage would cost you a month).

I think you need to use the next 2 years to pay off the loan (loans with less than 12 months remaining will mostly be ignored in affordability calculations) and save up a bit of money to cover your costs...

CH27

tc83 wrote: »

I want to move house but I'm having a problem getting a mortgage for the amount I need.

The problem is I have a loan (with Barclays) which I pay £328 p/m. I owe around £10-11k and have three years of repayments left.

I can afford this as well as the monthly repayments for the amount I want to borrow for the mortgage however the bank doesn't agree and will only lend me what I need if I don't have the loan repayments.

Any ideas how I can get around this? I did think my Parents could lend me the money to pay the loan off then I could pay them back in cash but this is not an option now.

Other things that may be relevant are I owe £128k on my house, it is worth £150-155k and the house I want to buy is £180k. I have £0 savings.

Thank you

Get the loan paid off ASAP & then look to move.

You've got a big loan & now you want to take on more commitments. Interest rates are bound to rise sooner rather than later so I think the bank are being very wise.
Where are you going to get your moving costs from?

tc83

I currently pay £710 on my mortgage and could comfortably afford to pay another £300-400 more as well as paying the loan off.

Tantalus86

tc83 wrote: »

I currently pay £710 on my mortgage and could comfortably afford to pay another £300-400 more as well as paying the loan off.

If that's the case then you should have been saving £300-£400 a month. From the bank's POV, the fact that you have no savings implies that you couldn't easily afford to pay another £300-£400.

AdrianC

tc83 wrote: »

I currently pay £710 on my mortgage and could comfortably afford to pay another £300-400 more as well as paying the loan off.

So how come you've not already been overpaying the loan?

What interest are you paying on this loan? Two seconds with a loan calculator website confirms it's going to be about 8-9%, right? And, on that interest rate, you're paying £1,400 in interest over the next three years.

Overpay by that £400/month, and you'll have the loan paid off in not much over a year and save nearly a grand in interest. THEN you can put the £730/month (your current £330 plus the £400 you can "comfortably" afford) that you'll not be spending on the loan any more towards a bigger deposit.

And don't say "But the prices will rise" - because you've already got a house, and the value of that's going to be rising, too. It's not even a very big step up the ladder - only an extra £30k value - are you looking in a different area? Maybe your area will rise faster than that one.

CH27

tc83 wrote: »

I currently pay £710 on my mortgage and could comfortably afford to pay another £300-400 more as well as paying the loan off.

So why do you have £0 savings & a huge loan?

marliepanda

You have 22k equity (assuming a selling price of £150k)

So thats just over 10% deposit on your new place, after selling fees etc I would say call it 10%.

Actually though you have an 11k loan, so really you only have 11k available, nowhere near 10% deposit, barely over 5% after fees etc.

So you can't afford it, in the eyes of the bank. Not rocket science.