How much can I borrow for a mortgage when I have unsecured debts to pay off?
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I have credit card and personal loan debt to the value of 27,000 pounds. My credit rating is not too bad, considering. If I want to get a mortgage, will this affect my chances of getting accepted?
andrea66
2 years ago
Expert Financial Adviser Answer
Darren Smith
answered 1 year ago
having unsecured loans/debt wont necessarily stop you being accepted unless if a particular lender has a particular underwriting rule. But....
what all lenders will do is analyse your income and outgoings, they will use your data in terms of living costs but they will compare to their own template of what they expect someone in different family circumstances to be spending on bills and food etc.
with any commitments with less than 6 months to run, most lenders will disregard altogether but when there is longer they will take the loan monthly repayment and a fixed % of your credit card balance, often 3%, as a monthly sum and then deduct the annual amount from your income before they multiply it.
eg
you earn £30000, with no debts a lender will publish a guideline of 3x income for a mortgage or £90000.
but lets say you have £15000 loan paying £400pm and £12000 credit card. They will take 3% of £12000 (£360) and add it to the loan payment of £400 giving £760pm they then multiply by 12 to give the annual equivalent of £9120. £30000-£9120 leaves £20880 which they will then multiply by 3 to give £62640 as the loan amount.
these figures might be extreme in your case but the method is generally that applied by most lenders but as with most things there will be variations as lenders decide their own meaning of "affordability".
if you have had problems maintaining your payments, regardless of how much you earn, want to borrow or have as unsecured debt, lenders will see this as a possible warning that you are already overstretched.
lenders do have an obligation to lend sensibly which can sometimes mean that they will decline cases that should go through.
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what all lenders will do is analyse your income and outgoings, they will use your data in terms of living costs but they will compare to their own template of what they expect someone in different family circumstances to be spending on bills and food etc.
with any commitments with less than 6 months to run, most lenders will disregard altogether but when there is longer they will take the loan monthly repayment and a fixed % of your credit card balance, often 3%, as a monthly sum and then deduct the annual amount from your income before they multiply it.
eg
you earn £30000, with no debts a lender will publish a guideline of 3x income for a mortgage or £90000.
but lets say you have £15000 loan paying £400pm and £12000 credit card. They will take 3% of £12000 (£360) and add it to the loan payment of £400 giving £760pm they then multiply by 12 to give the annual equivalent of £9120. £30000-£9120 leaves £20880 which they will then multiply by 3 to give £62640 as the loan amount.
these figures might be extreme in your case but the method is generally that applied by most lenders but as with most things there will be variations as lenders decide their own meaning of "affordability".
if you have had problems maintaining your payments, regardless of how much you earn, want to borrow or have as unsecured debt, lenders will see this as a possible warning that you are already overstretched.
lenders do have an obligation to lend sensibly which can sometimes mean that they will decline cases that should go through.
