Loan before mortgage

ashp_2

Hi,

We were planning to wait a year but that perfect house has come along. We are currently paying our loan off at 1000 a month. We have less than 12 Months remaining on the loan. Our loan is with HSBC and I'm assuming they will credit search us if we re arrange the loan.

We want to apply for a mortgage but would need to re arrange our loan to spread it over 4 years to reduce the payments by 750 a month. This would free up the some extra money for the mortgage. We have no other debts.

How would a lender view this? Especially in terms of a credit search for a loan prior to a mortgage application? It's a possibility we may try to get the mortgage with our bank (HSBC)

Thanks in advance for your replies.

foxy-stoat

Taking a loan out close to obtaining a mortgage may look like a borrowed deposit, but if you have the original loan statement and settlement letter, it may be ok for the lender.

David_White

Whilst it's not an exact science, running a credit check for a loan just before applying for a mortgage is likely to raise eyebrows.

As the above poster has said though, you can give a justification for it.

Obviously I don't know your financial circumstances, but if your current monthly loan payment is fixed at £1000 you may have to refinance or clear it before passing an affordability check anyway so it might be a necessary evil regardless of the impact on credit.

ashp_2

Thanks our original plan was to pay the loan off fully before applying but then we found a perfect house. We would certainly be able to prove the new loan would be used to pay off the existing one. Our minimum payment on our current loan is 760 and we overpay 300 a month.

It just seems like the only realistic option to get the house we really want now. It's a bit of a double edged sword situation. I think we will re finance the loan and even if we don't get the house we can stick to our original plan and carry on paying 1000 a month until it's cleared.