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Loans and mortgages....help!

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  • Loans and mortgages....help!


    Please could anyone tell me if having a loan, or both your partner and you having a loan, will affect the chances of you getting a mortgage?
    We have taken out a loan and haven't missed a payment and have recently had to take out another small loan. We do however have enough money for a deposit.

    ANy help would be appreciated.

    Thank you.

  • #2
    Re: Loans and mortgages....help!

    Taking out a loan and keeping up with repayments is actually a good thing as it helps with your credit scoring.

    People often don't realise that your credit score is not based on your credit, but on your debt - specifically, the proven ability to pay.


    • #3
      Re: Loans and mortgages....help!

      In order to assess whether you have the ability to keep up with your mortgage repayments, the lender will look at whether you have managed credit well in the past (in other words, have you missed/defaulted on any credit card payments, loans or other borrowing), and what your available income is. So yes in one way, a good credit history will be a positive thing which shows that you are a reliable and responsible borrower, and therefore less of a risk to the lender. On the other hand your current repayments on other loans will mean you have less available income to pay a mortgage.
      I would also be very careful about applying for credit in the period before you apply for a mortgage, so other loans, credit cards, store cards etc. Several applications for credit and credit scores in a short time will be a warning light to a lender.
      It might be a good idea for you and your partner to get hold of a credit report about yourselves. You can do this online with companies like Experian, who are one of the main credit scoring agencies. My husband and I did this before we applied for our mortgage recently and got a full report for about £6. That way, you can see exactly what your credit score looks like and there won't be any surprises when you apply for your mortgage. It works on a red, amber, green basis, so very easy to see any problem areas. Up to you of course, but we found it reassuring.
      I would add one final word of advice - we were fortunate to be in a position of both having an excellent rated credit history/score, no current borrowing (no loans/credit card debt etc) and having a deposit. We were still subject to what felt like endless questioning and interrogation by the lender (what's this £350 payment for on your bank statement? etc etc). Do be prepared to be asked to jump through many hoops - the banks are not keen to lend. You can see that from the interest rates available.


      • #4
        Re: Loans and mortgages....help!

        It won't automatically mean you will be declined, however bear in mind it is the lenders decision as to whether you are an appropriate risk to them.

        You need to have enough income to live on, so if your mortgage payment and loan commitments are using up all of your income then it would be foolish from a lenders point of view to lend the money to you so they will likely decline in that instance.

        Most high street banks can give and idea as to whether you meet criteria without doing a credit searach and can say whether you need to pay the loan off or not to meet the affordability, so I would go to my bank and ask them to assess this without a cresit search.
        View Mortgage FAQ's, including Lifetime Mortgages FAQ.



        • #5
          Re: Loans and mortgages....help!

          As long as you've saved up a decent deposit, you'll be fine. The bigger your downpayment, the more likely you are to get a mortgage.


          • #6
            Re: Loans and mortgages....help!

            The mortgage lenders have become much more cautious than previously & use a range of systems to determine mortgage affordability, credit scoring being one. The main focus these days is on affordability & the lenders have designed & implemented affordability calculators to determine the amount they are willing to lend. These calculators can be found on most lenders websites & will ask questions such as basic salary, any overtime or bonus, how dependents you have etc. However the most accurate way would be to apply in principle with either a lender or an independent mortgage advisor. Either way the application in principle system will combine the affordability calculator with the credit score to give you an accurate decision. Top tip.....Don't do it to often as too many credit checks can pull down your credit score.