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Getting a Mortgage When in Debt

See how expert help could help secure a mortgage while in debt

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: December 7, 2021

Looking to get a mortgage but worried about how being in debt could affect your chances? It’s true that with some lenders, debt can be a problem, but this certainly isn’t the case for every lender on the market.

With the help of a whole-of-market broker, you could save time, money and potential disappointment. They can help you find a lender who specialises in customers with debt, potentially increasing your chances of success dramatically.

In this short guide, we’ll be laying out key information you need to know about getting a mortgage when in debt.

If you would like to talk with an advisor about how to get a mortgage when in debt, call us on 0808 189 2301 or make an enquiry. We’ll introduce you to the right broker for free.

Can you get a mortgage with outstanding debt?

In short, yes. Your own personal and financial circumstances can have a huge impact on the likelihood of you getting a mortgage when in debt, so lenders will first need to see how much debt you are in and how you manage it.

Some lenders have strict criteria that prevent them from saying ‘yes’ to customers with a less than perfect credit report, as this can suggest a history of mismanaging finances.

Your ability to repay your loans on time and in full is of high importance to lenders, so lending to someone who has previously had trouble with repayments can be seen as risky.

That said, specialist lenders can take other factors into consideration such as your debt to income ratio.

What is a debt to income ratio?

debt to income ratio is essentially your monthly debt payments divided by your gross monthly income (this is your income before taxes or any other deductions are taken out).

Lenders use this simple calculation to determine whether you can comfortably afford your new mortgage along with your current other debts.

For example, if your total monthly debt came to £500 and your monthly income is £2,000, your debt-to-income ratio would be 25%, which is considered healthy.

Lenders express the debt to income as a percentage. To calculate the percentage, you need to divide your monthly debt by your monthly income and multiply this figure by 100.

The rule of thumb is that the lower the percentage, the better the debt to income ratio. That said, the debt to income ratio required for a mortgage can vary from one lender to the next.

Tips for calculating your debt to income ratio

Some lenders will also include the debt of your potential mortgage within the calculations when working out your debt to income ratio.

A lot of people forget to include many of their ‘debts’ when calculating their debt to income ratio, which can lead to confusion or miscalculations.

Remember to include all debts such as:

If you’re struggling to calculate your income to debt ratio, make an enquiry today and we’ll introduce you to one of the mortgage experts we work. The advice you receive is free and there will be no marks against your credit rating.

Can I remortgage if I’m in debt?

Yes, potentially. Being in debt doesn’t automatically make you ineligible for a remortgage. Your creditworthiness and affordability would be assessed in exactly the same as they would be for a primary mortgage.

Many property owners who find themselves in debt often consider a debt consolidation remortgage. This could be an option for you, but be sure to seek professional advice before making a decision on this.

How do I get a mortgage when in debt?

First calculate your debt-to-income ratio (see the section above) as the amount you spend repaying your debts each month is one of the key factors here. This will likely affect the amount you can borrow and the number of lenders who will consider your application.

Most experts will also recommend thinking about whether you’re in a position to settle any of your debts before you apply, or least putting a plan in place for repaying them, as the mortgage provider will be keen to see that you’ll be able to do this.

Next, it’s worth speaking to a whole-of-market broker as they can help you find the best deals for customers with debt. Since the amount of approachable lenders will likely be fewer, the best rates could be more difficult to come by if you go it alone.

Should I clear my credit card debt before making a mortgage application?

Some experts might recommend doing this, as debt of any kind will be factored into your affordability calculations and may affect the amount you’re able to borrow.

That said, some lenders might still offer you the full amount you’re looking for if you can present them with a viable plan to repay the debt alongside your mortgage payments.

The deals you qualify for if you’re unable to settle your credit card debt before you make an application might ultimately come down to the amount of debt you’re saddled with and how much you’re spending to chip away at it each month.

If you make an enquiry with us, we’ll connect you to a broker (for free) who can advise you on whether paying off your credit card debt ahead of your mortgage application is the best course of action.

How can a mortgage advisor help me?

Many of the advisors we work with have years of experience when it comes to helping people in debt find mortgages.

Searching the market for numerous lenders can be confusing, especially if you’ve never done it before and are unsure about what a good mortgage rate actually is. You want a fair and affordable deal, and working with a mortgage broker can help you get that.

The mortgage experts we work with have whole-of-market access to many lenders right across the UK and can compare various deals on your behalf.

Speak to an expert about getting a mortgage while in debt

Contact us today on 0808 189 2301 or make an enquiry here to learn more about how you could get a mortgage when in debt.

Speaking to a whole-of-market broker before you set off could save you time and money in the long run, as well as avoid unnecessary marks on your credit report.

We won’t charge a fee to introduce you to one of the advisors we work with and there’s absolutely no obligation on your part.

Ask us a question

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects.

Ask us a question and we'll get the best expert to help.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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