Loans will always have an impact on your mortgage affordability as it directly affects your credit score and monthly outgoings. However, the level of impact will vary depending on different factors.
Lenders will look at any existing debts when deciding whether or not to approve a mortgage and how much they are willing to lend the borrower. Before approving a mortgage, lenders will always assess a lender’s credit score in order to determine whether they can meet monthly mortgage repayments.
Therefore any existing debt, including personal loans, will impact a lender’s decision. However, this is not necessarily a bad thing. If you have existing personal loans but can prove that you are able to reliably meet payment obligations, this could support your case as a reliable borrower. The most important factor will be showing that your income is greater than your outgoing payments, including any loans; this is known as your debt-to-income ratio.
The following loans will impact your credit score and could, therefore, impact your chances of getting a mortgage:
Personal loan
Credit card
Car finance
Overdraft
Utility contract
Mobile phone contract
Applying for any of the following loans will register a mark on your file:
Personal loan
Car finance
Credit card
Overdraft
Mobile phone contract
Utility contract
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