Mortgage advice

greggles

Hello All,

Im looking to buy my first house but wondering whether my personal loan will have a negative effect. I currently have 18 months left on the loan and paying roughly 330 per month.

I have no other debts i.e. credit cards etc and my credit rating is 990.I have 20,000 for my deposit and I earn 40,000 a year.

Could I incorporate the loan into my mortgage?

Thanks

Malmo

The loan repayments would be factored in as an unsecured commitment when assessing your affordability and to determine the maximum mortgage you would be able to borrow.

Have you tried inputting your numbers into various lenders calculators to gauge the indicative range that you might get?

The credit score is irrelevant by the way as it's only a consumer score generated by a credit reference agency. It is not seen or used by anyone other than you.

JimmyTheWig

I believe for affordability most mortgage companies will subtract the £330 from what they believe you can afford each month. Which may have a considerable impact on what you can borrow.

Probably the best thing to do would be to pay off the loan with your savings now. Check with your loan company about whether there would be penalties for doing this and/or if you would save on the remaining interest.

Obviously this will reduce your deposit so to buy the same property you would need a higher mortgage. In effect, then, this would incorporate the loan into your mortgage, as you say. (*)
Whether you would be able to get the higher mortgage with reduced deposit will depend on various factors, mainly the size of the mortgage you are looking for. But if you're looking for a mortgage of 3x annual salary then that still would leave you with a 10% deposit which should be enough.

(*) There are disadvantages to doing this.
1. You will, presumably, be paying a lower interest rate on the mortgage than you were on the loan which is good but you will be paying the mortgage over a much longer timescale. This means that, unless you overpay the mortgage, you will end up paying much more interest on the loan that you would do if you paid it off in 18 months.
2. If you have a loan that you can't pay you will get taken to court. If you have a mortgage that you can't pay, you lose your house.

greggles

Thanks for the advice. Il pay off the loan early and then continue to save.