Restructuring Loans Prior to Mortgage Application

neilclough

Hello. I'll be applying for a mortgage soon and wanted some advice. I would like to reduce my monthly outgoings to make the repayments on my mortgage more affordable.

I currently have two professional trainee bank loans i took out whilst a student. One of which is at a high interest rate. I've about four years left on the loans and my monthly repayments are £318.

I've looked at some supermaket bank loans and if i take out new loans i can get a better interest rate, and i'll also be able to increase the repayment period to reduce my monthly payments. This may be as low as £170 per month. This seems to be quite a difference and would hopefully improve my mortgage deal, however i'm concerned that a credit application may affect my mortgage application.

I've a good/excellent rating on experian and don't want to harm it too much.

Is it worth taking the hit on my credit rating in order to get a better mortgage? I am aware that i'll ultimately pay back more in loans but for me right now my priority is getting a mortgage - i'm a first time buyer.

Thanks in advance for the replies

Smedders11

How 'soon' will you be applying?

neilclough

Hi, thanks for the reply. I'll be applying asap, hopefully in the next couple of months.

I've already applied for a mortagage on a property but the seller pulled out as i was getting the valuation.

Smedders11

Is the current affordable? In that a lender wouldn't see the payment as a huge chunk of your income? If it's not a particularly large percentage then I'd recommend holding off if you're going to be applying that quickly. Applying for credit before a mortgage is very risky because it's a search you could do without, and it's possible that they may overlap when you're searched, which would show you effectively owing twice as much (depending on how quick lender update to CRAs, and how quickly you pay off the one debt with the other).

neilclough

Ah, ok. Thanks. With regards to affordability, i'm looking to buy a shared ownership property in London and housing associations are strict with their affordability criteia. They us a 'debt to net' of 44%. This reduction in monthly costs is boarderline for a property i'm interested in.

If i restructured the loan then this could make the threshold. I see the issue with applying for credit in quick succession. Maybe i'll just wait, and look for somewhere else. Many thanks.