Debt and Affordability

DesertCamel

Hi,

I'm interested in people's guidance/opinions on getting a mortgage when you still have debt.

My understanding is that existing debt simply limits the amount you can borrow on a mortgage, and possibly makes you that bit less attractive to lenders... but, you will still be eligible for a mortgage.

And yet, it's generally accept that it isn't possible to use a personal loan as the deposit.

Getting to the point, I am looking at consolidating my existing debt into one personal loan. I'm sat staring at the loan calculator wondering what stops me from simply borrowing more and having the deposit money in my account tomorrow.

Is there a magic cut off point? Do you have to have more assets than liabilities in total?

G_M

There are 3 aspects:

* Are all your debts authorised? Or have you for example gone over your agreed overdraft limit?

* Your history of repayment; have you always made the required repayments on your debts/loans?

* How high are your total debts? What is your income?

A lender will look at all of these factors in deciding

a) whether you are a good risk (or likely to default)

b) how much you can afford to borrow (and still make repayments)

Pixie5740

Your solicitor, who will most likely also be the solicitor acting on behalf of the lender, will need to know the source of your deposit to comply with anti-moneylaundering regulations. If you borrow your deposit in the form of a personal loan it will severely restrict the lenders who will give you a mortgage.

ReadingTim

Have a look on the loans board or the debt-free wannabe board - consolidation loans rarely work.

kingstreet

The one lender likely to accept a loaned deposit will also deduct the cost of your credit from affordability even if it is to be/has been repaid if it remains visible on your credit file in the three month run-up to the application.

If you plan to embark on this, speak to an independent mortgage broker first so you don't shoot yourself in the foot by ending up with your affordability "taxed" by your existing commitments as well as the new loan.

Kidder81

I don't mean to be blunt but my opinion is that if you're having to borrow all/some of the money for a house deposit in the form of a loan, you cannot afford that house.

My advice would be to clear your debts and save for a deposit before considering a mortgage. A mortgage is a massive financial commitment and shouldn't be entered into lightly or before you're ready. You don't sound ready.

Manageable debt is not a big issue when taking out a mortgage but this screams unmanageable to me.

Just my opinion.