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Mortgage when in debt

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 13, 2023

Mortgage when in debt

Consider your income and other expenses before looking at your outstanding debt. The big picture is what mortgage lenders consider.

Your chances of getting a mortgage approved could increase if you can pay your debts on time and have extra capital.

The amount you can borrow will be affected by your outstanding debt. There is no way around it. It helps to show that you can afford a mortgage by showing affordability through lower expenses or having a high income with a lot of capital.

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What are debt mortgage lenders?

Are you looking to get a mortgage? Worried about your credit score and how it could impact your chances of getting one? While it is true that debt can pose a problem for some lenders, this is not the case with all lenders. As mortgage brokers, we have debt lenders to whom we can introduce you.

A whole-of-market broker can help you save time, money, and possibly disappointment. You can find debt mortgage lenders specialising in debt customers, which could increase your chances of success.

This guide will provide key information about how to get a mortgage if you are in debt.

To speak with an advisor about how to obtain a mortgage if you are in debt, please call us or submit an enquiry. We will introduce you to the right broker and mortgage provider free of charge.


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What is considered a mortgage debt?

Knowing what mortgage lenders consider a “debt” will help reduce or eliminate the chance of getting rejected for a loan. These debts may be more important than saving for your deposit.

Some of the things that can be included in debt include:

  • Student loans
  • Credit cards (also store credit cards)
  • Car financing
  • Mobile phone contracts
  • CCJs and IVAs
  • Bankruptcy

Lenders can also distinguish between ‘good and bad debt. Good debt is low-risk loans such as student loans and car finance. Bad debt is credit with higher risks or is more costly, such as store cards or payday loans.

What debts are you currently carrying, and how does this affect a mortgage application?

Student loans

The Student Loans Company is a government-backed financial plan. Your monthly loan repayments are deducted from your pretax income each month. This should not be a problem for mortgage lenders.

However, if you have taken out any other loans (e.g., if you took out other loans (e.g. commercial) while you were still a student, this may affect your ability to get a larger mortgage loan. It all depends on how big your student loan was if you have repaid each monthly payment on time and in full, as well as how long the loan term is.

Credit cards

Credit cards don’t have to be a problem. Even if your credit history is poor, credit cards can help you build credit.

It is more about how you use them. Mortgage lenders will not be happy if you have a high credit score and can only pay the minimum monthly. If you only spend 20% of your monthly borrowing limit and then repay it in full each month, this is a sign that you are responsible with credit.

Car financing

Mortgage providers are well aware that cars can be expensive. They also know that cars are essential for most people to commute to work. Without a job, your mortgage would not be possible.

Car finance is considered a relatively ‘good’ debt. You should have a steady income to own your final possession. It is in your best interest to make each monthly payment on time and in full. Your car may be returned if you fail to pay your monthly payments. A mortgage lender will not consider this a bad loan as long as you can afford your monthly car financing payments.

Mobile phone contracts

These mobile phone contracts can be problematic when applying for a mortgage. Credit rating can be affected by forgotten contracts, late payments from years ago, and price changes.

The rule of thumb is that a bill paid on time and in full is acceptable. A mortgage lender will not consider it a serious loan. However, if you have a large bill or a lot of unpaid phone bills, it will affect your chances of getting a mortgage.


Your ability to obtain a mortgage will be severely affected if you are convicted of a County Court Judgement (CCJ) or insolvency voluntary agreement.

Few lenders will lend to someone with a recent CCJ/IVA. It may be difficult to obtain a mortgage if you don’t have a large deposit. However, it is not always the case. To find out more, contact a mortgage broker today.


You will not be able to get a mortgage from most lenders if you declare bankruptcy in the current year.

But don’t panic. A few mortgage providers will accept bankrupts who have been declared bankrupt within one year of filing bankruptcy. However, the chances of acceptance increase the longer the period has gone.

You may not be able to find unique deals if you apply on your own for a mortgage. Make an appointment and discuss your circumstances and available options.


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Is it possible to get a mortgage if you have outstanding debt?

Yes. Your personal and financial situation can affect the likelihood of getting a mortgage if you have debt. Therefore, lenders will need to know how much debt you have and how you manage it.

Lenders may not lend to customers with poor credit reports. This can indicate a history of financial mismanagement.

Lenders are very concerned about your ability to repay your loans fully and on time. Therefore, lending to someone who has had problems with repayments before can be considered risky.

Specialist lenders will consider other factors, such as your income to debt ratio.

What is a debt-to-income ratio?

An income-to-debt ratio is simply your monthly debt payments divided by your gross monthly income. This is your income before taxes, and other deductions are taken.

Lenders use this simple calculation to determine if you can afford your new mortgage and other debts.

If your monthly total debt was £500 and your income monthly was £2,000, then your debt-to-income ratio would be 25%. This is healthy.

Lenders refer to the ratio of debt to income in percentage terms. Divide your monthly income by your monthly debt and multiply this by 100 to calculate the percentage.

A rule of thumb is that the higher the percentage, the better your debt to income ratio. However, each lender may have a different debt-to-income ratio.

Here are some tips for calculating your debt-to-income ratio

Some lenders may also consider the potential mortgage debt when calculating your debt to income ratio.

Many people overlook their ‘debts” when calculating their debt-to-income ratio. This can cause confusion and miscalculations.

All debts, such as:

  • Rent payments
  • Car loans
  • Student loans
  • Credit cards
  • Catalogue debts

We’ll help you find the right mortgage expert if you have difficulty calculating your income to debt-ratio. You will not be charged any fees for the advice you get.


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Can I remortgage if I’m in debt?

Yes, potentially. You are not automatically ineligible to remortgage if you have debt. The same criteria would apply to a primary mortgage: affordability and creditworthiness.

A debt consolidation remortgage is a popular option for property owners in financial trouble. You might consider this option, but you should always seek professional advice before making any decision.

What are the best ways to get a mortgage if I’m in debt?

Calculate your debt-to-income ratio ( ) first. This is because the amount you pay monthly to repay your debts is one of the most important factors. This will affect your ability to borrow and the number of lenders accepting your application.

Experts will recommend that you think about whether or not you are in a position to pay off your debts before applying for a mortgage.

A whole-of-market broker can help you find the best rates for customers with debt. The number of lenders available will likely be smaller, so it may be harder to find the best rates if you do it yourself.


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Do I need to repay my credit card debt before applying for a mortgage?

Experts might recommend this as any type of debt will be included in your affordability calculations. This could affect how much you can borrow.

However, lenders may still be willing to offer you the full amount if you present them with a plan to repay the debt and make mortgage payments.

You might be eligible for deals if your credit card debt is not paid off before you apply. It could come down to how much debt you have and how much money you spend each month to pay it off.

We’ll connect you with a broker free of charge if you send us an inquiry. They can help you decide if to pay off your credit cards before you apply for a mortgage.

How a mortgage advisor can help

Our advisors have a lot of experience helping people with debt find mortgages.

It can be difficult to search the market for multiple lenders, especially if it’s your first time.

Our mortgage specialists have access to all UK lenders and can help you compare different deals.

Talk to an expert about getting a mortgage loan while you are in debt.

To learn more about mortgages for debt, send an enquiry today.

Talking to a broker in all markets before you leave the house can save you time and money and avoid negative marks on your credit score.

Contact us now to get help with your mortgage. We will not charge you a fee to refer you to an advisor we work with, and there is no obligation.


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