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can you have a mortgage if you have a loan?
can you have a mortgage if you have a loan?

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Can You Have a Mortgage If You Have a Loan?

If you have a personal loan, you might be curious about how it might affect your chances of getting approved for a mortgage.
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A personal loan will always affect your chances of a mortgage approval because lenders look at your credit report and financial obligations to determine if you can make your monthly mortgage payments.

The long-term effects on your financial health should be considered whether you have a personal loan, wish to borrow against your mortgage, or just want to consolidate your debts with a mortgage.

Do personal loans affect my mortgage application?

Yes. All of your debts will be considered by mortgage lenders when determining whether you qualify for a mortgage and how much you can borrow.

When determining whether or not you will be able to afford the monthly mortgage repayments, they will consider your credit history, among others. 

Since you already use a portion of your income to sustain and pay off this additional obligation, debts unrelated to the mortgage will have a significant impact on how your application is viewed.

Most experts will advise against taking out a personal loan shortly before applying for a mortgage. In the three months before applying for a mortgage, taking out a personal loan could lower your credit score and cause your mortgage application to be denied.

Some brokers advise waiting six months between receiving a personal loan and applying for a mortgage to be sure you won't be denied one because of previous personal loan debt.

Types of loans

The effect on your mortgage application will likely depend on the sort of loan you have as well as your financial history. If handled well, a personal loan or car finance deal should have little impact on it.

The same goes for items like credit cards and other revolving kinds of credit.

Payday loans are one loan type, however, that virtually ensures denial. Many lenders automatically reject applications from borrowers who have had a payday loan within the last 12 months; some will check back as long as six years.

These short-term, high-cost types of credit show that the borrower is actually struggling. In this aspect, first-time buyers are probably going to face particularly harsh criticism.

Of course, there are exceptions. Some lenders will take into account candidates who have a payday loan on their record as long as they have a good credit score and no other indications of financial hardship. Everything is always case-by-case.

Loans that can impact mortgage affordability

As part of their qualifying criteria, mortgage lenders will look at the information on your credit report when they evaluate your mortgage. 

Any of the following loans can leave a mark on your credit record:

  • Car loan

  • Credit card

  • Overdraft

  • Utility contract

  • Mobile phone contract

The more loan applications you make, the less chance you have of getting a mortgage approved. 

If you really must apply for credit, you might be able to avoid damaging your credit history with just one application if you make sure you can afford it. It's always recommended to pre-qualify first, as this will only trigger a soft credit check on your profile. 

Keep in mind that some mortgage providers might turn you down if you've taken out a payday loan in the year before you apply for a mortgage.

The difference between a mortgage and a personal loan

Any loan from a bank or other lender that is not secured by an asset is referred to as a personal loan. These kinds of loans are often also referred to as unsecured loans.

A mortgage is a type of financing used to purchase real estate. A mortgage, in contrast to personal loans, is backed by the estimated value of the property until the loan is fully repaid.

A mortgage can be used to buy your first home, an additional property, or even business property. 

Can you get a mortgage if you have a personal loan?

Yes. Having a personal loan shouldn't prohibit you from getting approved for a mortgage, though lenders will consider any current debts when evaluating your mortgage application.

Mortgage lenders will consider your current debts when determining whether you can afford to take on further debt. You must therefore demonstrate your ability to pay off all of your debts as part of your affordability assessment.

Different lenders evaluate your mortgage applications in different ways. Speak with a whole-of-market broker to get the best mortgage deal when you have personal loans to repay.

Whole-of-market brokers have access to mortgage lenders in every region of the U.K. and are familiar with the lenders who will work with consumers who have existing personal loans.

A specialised broker or financial advisor will be aware of the lenders most likely to approve your mortgage application, and they can help ensure that your application is approved and you don't run the danger of damaging your credit score.

How can a personal loan improve a mortgage application?

A personal loan may occasionally be beneficial to your mortgage application if you use caution. You must take the long view if you want to make personal loans work in your favour.

You could use personal loans in a few different ways to support your next mortgage application:

  • As evidence of your responsibility, having a personal loan and making on-time payments will really improve your credit score. To benefit from the boost that on-time payments can give your credit score, some experts advise making some sort of debt, that you can comfortably repay quickly, in the months before applying for a mortgage.

  • If you have the money available, you should think about paying off a credit card or personal loan in full before submitting an application for a mortgage.

  • Reorganise and refinance expensive credit card debt or other high-interest debt with a personal loan.

In conclusion, as long as you can afford further debt and the loans weren't taken out in the three months prior to your application, there is no reason that your personal loan should prohibit you from getting the mortgage you want.

Can I use a personal loan to pay a mortgage deposit?

You may want to think about using a personal loan as a down payment for a mortgage if you want to take a long-term, strategic strategy.

Some lenders may take a personal loan as a down payment for your mortgage, but others might not. A whole-of-market broker will be able to assist you in obtaining the best offer by knowing which lenders will approve this usage of personal loans.

If you are thinking about using this strategy, you should:

Make sure you can afford the mortgage you wish to take out, as well as the debt on the personal loan. Before agreeing to a loan that might not be in your best interest, it is a good idea to speak with a mortgage broker.

Take out the personal loan a few months before applying for a mortgage. Before using the funds as your mortgage deposit, some mortgage lenders may want to know that they have been sitting in a bank account for a few months.

Applying for a personal loan after getting a mortgage

It's not a good idea to take on additional debt after receiving mortgage approval.

If at all possible, refrain from applying for any loans, credit cards, or other forms of financing until your mortgage is fully secured.

Whatever new credit application would appear as a potential red flag if your mortgage lender wanted to re-run a credit check for any reason.

Your lender may opt to revoke the mortgage offer if they believe that your new credit agreement will have an impact on how you repay your mortgage.

Can I add a personal loan to a mortgage?

It is technically possible to combine your personal loan with your residential mortgage, but there are a lot of factors to take into account first.

Although it may be an attractive thought, before making any significant decisions on this, consult a specialist for professional mortgage advice. It may be tempting to wish to combine your personal loan or other obligations into your mortgage.

Here are some things to consider before committing to more mortgage debt:

Do you have enough equity to support more borrowing?

You are borrowing against the value of your house when you borrow money against your mortgage. If you wanted to borrow more money, you would need to have enough equity in your home to do so; otherwise, it would likely be highly expensive or quite challenging to do so.

Does your mortgage contract allow you to borrow more money without paying extra?

Even if your mortgage terms permit additional borrowing, you might be charged an additional cost. Any fees or related administrative expenses will be added to the loan, raising the total amount borrowed.

Your interest payments will be impacted, and your monthly repayments will go up.

Would you have to refinance?

There can be further expenses if you ultimately need to remortgage or get a new mortgage to borrow more money to pay off your obligations. For instance, leaving your present mortgage agreement may be subject to costs or penalties that make the change unaffordable.

The regulations for leaving early are very severe for fixed-rate mortgages, and doing so could result in expensive early payback fees.

How much would it cost to consolidate your mortgage and a personal loan?

It may end up costing far more than you anticipated to spread out the expense of a small personal loan over the duration of a mortgage.

If you're thinking about consolidating your mortgage debt with a personal loan, you should speak with your mortgage lender to find out how much you can borrow and how much it will cost.


Personal loans can have an effect on your credit profile and your ability to qualify for a mortgage. If you are not sure how to handle personal loans and other debt when you want to apply for a mortgage, speak to an independent mortgage adviser for expert help and guidance.

An experienced financial adviser can help you make the best decisions based on your unique financial situation and ensure that you choose a mortgage product that suits your needs. You can also use a range of online mortgage calculators to see how much your mortgage costs could work out.

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