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If I Clear my Debt can I get a Mortgage? 2022 Guide

If I Clear Debt Can I Get Mortgage

For free and impartial money advice and guidance, visit MoneyHelper, to help you make the most of your money.

If I clear my debts can I get a mortgage? If you’re currently planning a mortgage application but existing debts or previous arrears are playing on your mind, this is the article for you. We discuss if and how debts can affect your mortgage application by answering the most asked questions. 

Don’t worry, here’s what to do!

There are several debt solutions in the UK that can be used to improve your finances. Choosing the right way to tackle your debt could save you time and money, but the wrong one could cause even more harm

It’s always best to find out about all your options from a professional before you take action.

Fill out the 5 step form to get started. 

Debt and mortgage applications

To be approved for a mortgage, you must prove to the lender that you can afford to repay the mortgage comfortably. Various stress tests and affordability tests are used to check whether you will be able to repay now and in the future. 

Mortgage underwriters will include a debt-to-income assessment, where they factor in your existing debt repayments to their decision. They’ll also look at your credit file and check your credit score. 

How is a debt to income ratio calculated?

The debt to income ratio will be part of your mortgage application assessment. It is calculated by adding together all of your monthly debt repayments and then dividing this amount by your gross monthly income

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Can I get a mortgage if I’m in debt?

It is possible to get approved for a mortgage if you have outstanding debts elsewhere. The mortgage lender will include any existing credit repayments when assessing you for a mortgage. Many people get approved for a mortgage with outstanding debts, such as loans, credit cards and other mortgages. 

This is not the same as having debt arrears. If you are already behind on debt repayments with other creditors, you could still be approved for a mortgage but it will be more difficult. Not only will you have debts to repay, but having arrears is likely to have reduced your credit score which could make you less appealing to the mortgage provider. 

How much debt is acceptable for a mortgage application?

There is no fixed amount of debt that is accepted when making a mortgage application. In fact, each mortgage lender can apply its own debt-to-income ratio, and the outcome of your application will be based on more than just how much debt you have. 

It is recommended to speak with a mortgage expert to uncover what type of loan could be possible with your level of existing debt.

If I clear my debt can I get a mortgage?

Clearing your debt does not guarantee you will be approved for a mortgage. It could improve your personal finances, which improves the strength of your mortgage application, but the lender can still reject you even if you paid off all your debts. 

Whether you get approved for a mortgage or not will depend on an array of factors and not just if you have debts or not. It is best to seek advice from a professional mortgage adviser if you are unsure. Sometimes you can get free mortgage advice from brokers. 

Feeling like Chandler?

how to debt

Is all this information starting to feel overwhelming? Don’t panic! There’s plenty of help available. You can get started below.

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Is it best to pay off all debt before buying a house?

Paying off your debts before making a mortgage application could improve your chances of getting approved. This is because reducing or clearing your debt will improve your debt-to-income ratio, which is part of the mortgage assessment. It could also improve your credit score. 

But it might not be necessary or beneficial to clear your debt before applying for a home. 

Should I clear my debt before applying for a mortgage?

The decision to clear your debts before applying for a mortgage or not should be based on individual circumstances. Paying off your debts may strengthen your application, but so could using that money to put down a bigger deposit. 

If you choose not to pay off your debts and use the money to increase your deposit, your application could be stronger than if you cleared or reduced your debt. You should weigh up the pros and cons based on your personal situation for the answer. Get help from a mortgage advice company if needed. 

How long after clearing debt can I get a mortgage?

Although you can be approved for a mortgage with debt, it is often recommended to wait three to six months before applying for a mortgage after paying off your debts. This is recommended to protect and improve your credit score. 

But it is still possible to apply successfully with existing debts or just after paying off your debts. It all comes down to individual circumstances. 

If you are applying for a mortgage after paying off credit arrears that have damaged your credit score, you might want to wait until your credit score has recovered before making an application, rather than waiting a set amount of time. 

Should I use an adverse credit mortgage broker?

Aspiring mortgage applicants with poor credit history could use a mortgage broker who specialises in helping people with poor credit to get a mortgage. Many standard brokers can also offer this service. You are never forced to use a mortgage broker at all.  

Feeling like Chandler?

how to debt

Is all this information starting to feel overwhelming? Don’t panic! There’s plenty of help available. You can get started below.

Fill out the short form

Can I get a mortgage if I pay off my debts? (Quick recap)

It is possible to get approved for a mortgage if you have debt or if you have paid off your debts. The lender will decide on your application by looking at your debt to income ratio, but they will also make their decision on several other factors. You should seek mortgage advice services for a personalised assessment and guidance. 

Find ways to pay your debt off here

If you have decided to clear your debts before applying for a mortgage but are struggling to make repayments, you may want to consider debt solutions. There are many ways to get out of debt comfortably, such as a Debt Management Plan. Learn about all the possible solutions on this dedicated page.

Are you struggling with debt?

Affordable repayments

Reduce pressure from people you owe

Stop interest and charges from soaring

Get started

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Are you struggling with debt?
Are you struggling with debt?
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  • Reduce pressure from people you owe money to
  • Stop interest and charges from soaring
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