Will a consolidation loan hurt my mortgage application?

dt2703

I have a couple of credit cards and a loan. The interest rate on the loan is pretty good (11%) but the 0% periods on the credit cards have ended, so now I'm paying full interest on those (~24%).

The bank have offered me a consolidation loan at 9%, which I can use to pay off the two credit cards, and optionally the other loan as well.

This would obviously be a great saver for me, but as I'm on the verge of getting a mortgage, my advisor suggested that taking the consolidation loan (and therefore incurring a credit search) could hurt my chances of a mortgage application going through.

I have the mortgage deposit saved and it's now just a case of finding the right house, so theoretically if I found one tomorrow I could start the mortgage application immediately (although I've been looking at houses for a month or two now, so it could equally be another month or few away also).

My credit score is excellent, and my report has 0 negative factors.

Would taking this consolidation loan hurt my credit score in the eyes of the mortgage lender? and if so, how long would that be the case for?

Hope this makes sense
Thanks, Dave

CLAPTON

dt2703 wrote: »

I have a couple of credit cards and a loan. The interest rate on the loan is pretty good (11%) but the 0% periods on the credit cards have ended, so now I'm paying full interest on those (~24%).

The bank have offered me a consolidation loan at 9%, which I can use to pay off the two credit cards, and optionally the other loan as well.

This would obviously be a great saver for me, but as I'm on the verge of getting a mortgage, my advisor suggested that taking the consolidation loan (and therefore incurring a credit search) could hurt my chances of a mortgage application going through.

I have the mortgage deposit saved and it's now just a case of finding the right house, so theoretically if I found one tomorrow I could start the mortgage application immediately (although I've been looking at houses for a month or two now, so it could equally be another month or few away also).

My credit score is excellent, and my report has 0 negative factors.

Would taking this consolidation loan hurt my credit score in the eyes of the mortgage lender? and if so, how long would that be the case for?

Hope this makes sense
Thanks, Dave

if the loan makes no difference then you will save a little interest

if the loan is significant then you lose a house

Foxy-Stoat_3

Either way you will have the same amount of debt as long as you cancel the credit cards you are paying off and clear the loan at the same time.

dt2703

Just to clarify, the consolidation loan will not be secured against a house. It would be a personal loan, so I don't think I would lose a house that I don't even own yet.

I'm paying three lots of interest each month, around £200 in in total, over the two credit cards and the existing loan. By taking this new loan and paying them all off, I will pay only have 1 lot of interest each month and at 9% it will be much less than I'm currently paying.

So yes, I will still have to pay them same amount of debt, that's fine, but the interest will be much less, which is the whole point of consolidating.

I appreciate the responses, but the question was really about how taking out this consolidation loan (and having the search on my credit report that comes with it) will affect my mortgage application...



Thanks
Dave

Foxy-Stoat_3

Only the lender can say for sure if it will have a negative effect...but only one search shouldn't effect it too much.

I had 4 searches done on my file 2 months before accepting a mortgage offer.

andilong1

I think it depends on the time scale you will be applying, so difficult to give a definitive answer.
I consolidated 2 cc to a lower monthly payment and less interest in February, found a house we love the start of this month so began the application process, although the MA seems to think it wont be a problem we are still to receive a mortgage offer.
Personally i would wait after all it may just look like you have taken a loan for your deposit ?