Mortgage advice

Bigpot270

Hi i will be applying for a mortgage in 12months time. I have 20k saved for a deposit and my partner has 10k saved. I earn 40k a year. I recently took out a 10k personal loan for car over a period of 8 years monthly payment 166 pounds. No other debts. Will this loan affect my mortgage application ? Also I am overpaying the loan back where possible to save interest so by the time I apply for mortgage personal loan will have around 5k left to pay 

kingstreet

The monthly loan payment may reduce what you can borrow.

Bigpot270

Thanks for the comment but in terms of the application the loan shouldn’t be an issue? Me and my partner both earn 40k a year and the house we are looking at is around 250000 so the borrowing amount isn’t a issue just was wondering if having a personal loan will effect the decision?

grumpy_codger

Any loan affects your application because the repayments increase your monthly outgoings and hence affect affordability calculations.

Brie

Are you sure you have no other debts?  No monthly payments for contents or motor insurance?  Mobile contract?

Overdraft and credit cards whether you are using them or not are available credit that you might max the day after the application so will also be taken into account.  So is there anything you can reduce/close?

And the obvious thing to check - are you both registered to vote?  Makes you look stable apparently.

Altior

How much can you both realistically save over the next 12 months, without the loan repayments?

In this scenario I would most definitely settle the loan asap. You have more than enough capital to be able to do so, avoiding almost £6K interest and an almost 8 year long liability. A year should give you plenty of opportunity to add to the capital reserves again. I guess psychologically you didn't want to dip into capital you'd set aside for the property, but it's overwhelmingly logical to clear high interest bearing debt, if you have the opportunity to do so.