Impact of personal loan on mortgage approval

WoolForrest

Hi,

I plan on applying for a mortgage in the latter half of next year. At the moment however, I need to apply for a £20K personal loan (within the next month).

I know that generally it's advised that you pay off as much of your existing debt as possible before applying for a mortgage, however I'll obviously still have a lot of the 20K personal loan outstanding by the time that I apply for the mortgage. I plan on paying the loan off over 5 years, so will have about £17k left to pay off on the loan.

Has anyone been in a similar situation before, and could advise me on how to go about limiting the impact of the 20K loan on the likelihood of me getting approved for a mortgage? I have an excellent credit rating, and a very low amount of existing debt (I could pay it off whenever I want, but the interest is 0% and I get good interest on my savings so I don't). Being approved for the loan is unlikely to be a problem.

Thanks

amnblog

You can’t limit the impact.

The impact is what it is.

Whether it will cause you problems in getting a mortgage we cannot gauge without further information.

SimbaSimon

It's hard to say without knowing what the mortgage will be, what your deposit will be, and many other factors. If it helps, I applied for a 13k loan a month before a 170k mortgage application and it was fine, but then I was also putting down a sizeable deposit that was much bigger than the loan.

Edi81

It’s all relative.
Salary, mortgage value, deposit for house.
Without knowing those it’s impossible to say if it will have an impact.
It could look that you’ve borrowed your deposit which is a no-no.

WoolForrest

Salary = £41K
Deposit = £19K (roughly - I might decide to wait till around end of the year, and will be able to put down around £23/24K)
Mortgage=£210k roughly

Edi81

I’m not a broker but that doesn’t look good.
Savings of £20k and a loan of £20k.
Mortgage of 5x salary

What is more important to you? The house or what you are going to borrow £20k for?

LRmortgage

You’re looking for over 5 x your income, plus having a loan in the background.

Extremely unlikely to happen I’m afraid.

Thrugelmir

£20k interest free loan? Tell us more. We'd all like one of those.

WoolForrest

It's my existing debt that is interest free not the 20k loan (which i haven't taken out)

muhandis

CC debt (even on 0%) still has a disproportionately significant impact on your borrowing figure. We had to pay off all our large stooze pot when getting a mortgage.

WoolForrest wrote: »

It's my existing debt that is interest free not the 20k loan (which i haven't taken out)