Can You Get a Mortgage With an Outstanding Debt?

Written by Will Lyon on 10 December 2019

In a word, yes. Regardless of the myth that arrears of any kind will ruin your chances, you may still be able to get a mortgage whilst having an outstanding debt.

When applying for a mortgage, you’ll need to come across as attractive as possible to lenders. You might think having any outstanding debt will work against you in this regard. But, there are still ways you can improve your odds:

  • Check your credit file – Looking at your credit report is a good place to start. Lenders may have their own individual criteria for who they lend to, but they will all check your credit report. This lists past credit cards, overdrafts, even phone contracts. Make sure checking your credit file is first on your to-do list. If there are any errors, get them corrected ASAP!
  • Confirm your financial links – A financial link or association is anyone you’ve had a financial relationship with, through a joint credit card perhaps. If you’re separated from someone, make sure you remove the financial link between you. Should they miss a payment, this could likely reflect badly on you. As you’ll be affected by all types of joint accounts, it’s worth considering previous flatmates if you shared a bank account for bills.
  • Register to vote – Whether you’re in debt or not, if you aren’t on the electoral roll, your chances of getting a mortgage will be very slim. Lenders use this data to confirm your identity, so not registering to vote could hinder your chances.

There’s no sure-fire way of being approved for a mortgage, even with a perfect credit score. Nevertheless, it’s worth considering these points when looking to apply. Looking for some more tips? Read our guide on getting a mortgage, particularly after a debt solution.

mortgage debt

Can you get a mortgage with credit card debt?

Simply having credit card debt won’t necessarily stop you getting a mortgage. However, the amount of debt you owe may well influence the amount lenders are willing to give you.

Most lenders do understand that sometimes credit card debt is unavoidable, and that unforeseen circumstances do warrant paying for things you can’t afford at the time, such as a car repair or boiler replacement for example.

Although credit card debt suggests to lenders that you are having financial trouble, it is not the deciding factor. One of the other main factors that will influence mortgage lenders is your debt-to-income ratio.

What is debt-to-income ratio?

Put simply, your debt-to-income ratio is your monthly debt payments divided by your gross monthly income.

Lenders use your debt-to-income ratio to see if you can manage your monthly repayments. Let’s look at an example:

If you have a monthly repayment of £250, but your monthly take-home pay is £2500, you may well be able to afford a mortgage of £450 a month.

If however your income was £1000 less at £1500 per month, you would likely struggle to make the repayments as well as the mortgage, so mortgage companies would be less inclined to lend to you.

Can I consolidate my debt into a new mortgage?

If you’re struggling with both your debt and mortgage repayments, you may be able to consolidate your debts via a re-mortgage.

The interest rates charged on mortgages are often lower than other types of debt, credit cards for instance. For this reason, many people see consolidation as a preferred option. Credit cards are a considerably more expensive way to borrow money when compared with a mortgage.

However, we are seeing a growing number of people consolidating to pay off their debts, only to find they are in a similar situation further down the line. In these cases, they’ve dealt with the debt itself, rather than the cause of what got them in debt in the first place.

If you’re looking to get a mortgage, but you’re worried about the effect debt will have on your application, get in touch today.


Filed under Debt Facts

This article was checked and deemed to be correct as at the above publication date, but please be aware that some things may have changed between then and now. So please don't rely on any of this information as a statement of fact, especially if the article was published some time ago.

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