Personal Loan before a Mortgage

OnlineAlex

Hello,

I’m currently looking to buy my first property as a sole applicant and all is going surprisingly well. The only thing that is impacting on what I can borrow is a personal loan I have for my car, which, due to the monthly repayments, is lowering my buying power by about £15,000. I have held this for over 2 years now and have a remaining balance of £7800 at a cost of £202pm for remaining 2 ½ years on the term.

My mortgage advisor has suggested I take out loan for exactly the same value (£7800) but over a longer term (5 years) to bring the monthly repayments down to approximately £140pm, which would allow me to borrow the maximum amount my salary will allow on a mortgage. This is with the view to shorten the loan term once I’m on the property ladder.

My question is, if I were to take out a loan now would it damage my chances for a an immanent mortgage application? From what I can tell from researching online, it might make an application difficult for the 6 weeks after taking the loan, however, I won’t be in a position to make any offers until the end of November so that wouldn't be a problem. Likewise, I am not looking to borrow more credit than I currently have as one loan would clear another but just over a longer term. Unfortunately, I am not in a position to clear the loan before application.

Any advice on this would be great. I’m happy to give any more information if needed.

Thanks in advance,
Alex

Carrot007

I wouldn't.


1. It's going to look weird on your report so close.


2. If it's only 15K then it's neither here nor there. No sane person would borrow anywhere near the allowed limit,

OnlineAlex

Thank you, I totally see you point. However, £15k does make a considerable difference in my price category. As a single applicant (taking the loan over a longer term) I could borrow £117k with the £202 a month it is £102k. Unfortunately, there just isn’t anything on the market that cheap.

Whilst I wouldn’t use all of my allowance I will need more borrowing power to secure a property. I think it’ll look weird too but do you have any idea it might look like that? For example 3 maybe 6 months?

Thank you so much for you response! :)

nik_k

Just reading through this, and something occured to me... If you have an o/s balance of £7,800 and are repaying £202/month for 30 months, it won't clear the loan. Are you sure you have the monthly payment and/or the remaining term correct?