Can you get a mortgage if you have debt?

If you have debt and want to buy a home, you’ll probably wonder how this will impact your ability to get a mortgage to buy a property.

Not all debts are created equal. It will depend on how much you owe. It always comes back to proving how reliable you are with money. A couple of minor missed payments shouldn’t impact your credit score too drastically.

Debt doesn’t have to cloud the whole picture. It is only one part of the equation when it comes to what lenders are looking for. If all the other areas of your finances are in order, then this could help your case. It’s best to get impartial debt or financial advice.

Debts fall into two categories:

• ‘Good’ Debt – Low-risk loans, such as car finance and student loans.
• ‘Bad’ Debt – Higher-risk or more expensive forms of credit, such as store cards or payday loans. This category will also include CCJs, IVAs and Bankruptcy.

What about defaults? How do they affect mortgages?

A default is a warning sign that you can’t afford your current payments. You will receive a notice that will give you at least two weeks to catch up with any missed payments. If you can do this, your account will continue as normal. If you can’t make up the missed payments within this time, your account will go into default.

If you can afford to repay your debt and have spare capital, this could improve your chances of securing a mortgage. Where possible, it’s a good idea to pay back any more that you owe in an official capacity, whether that’s a utility bill or a rent payment.

If you have any defaults dating back more than six years, this won’t show up on your credit score report.

Can you get a mortgage with debt?

It is possible to get a mortgage with debt. However, if your credit report has been adversely affected, your options may be more limited. It’s worth seeing how you can pay back any outstanding debts to put your finances in a more favourable position.

No two lenders are the same, and their criteria will vary. Seeking advice from a reputable Whole of Market mortgage broker can make all the difference. Contact us today to inquire about our services or to book your free initial consultation.