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Does debt consolidation affect getting a mortgage?

MORTGAGES | 12.03.2021

As a first-time buyer, you might be worried about debt consolidation affecting your mortgage application. But getting your debts under control before applying for a mortgage is actually highly recommended – it’s a clear indication to a lender that you’ll be able to borrow and spend responsibly. In this guide, we’re going to show you how debt consolidation can actually help you get your mortgage on the move. Here’s everything you need to know.

What is debt consolidation?

Over time you can build up a number of debts with varying interest rates, such as a mortgage, credit cards, store cards, overdrafts, and personal loans. When this happens, it can be difficult to manage the repayments of these debts. Debt consolidation is where you merge multiple debts into one loan, meaning you’ll only have one monthly repayment to make. 

Can I get a mortgage if I consolidate my debt?

Absolutely. As long as you always make your repayments, debt consolidation shouldn’t affect your mortgage eligibility. In fact, it may even help you get approved.

Do debt consolidation loans affect your credit rating?

If you’ve struggled to make your monthly repayments in the past, your credit score will take a hit and affect your mortgage application. It’s also worth bearing in mind that applying for a debt consolidation loan will record a hard search on your report, which may temporarily lower your score. As long as you don’t apply for credit frequently, your score should recover relatively quickly.

The benefits of debt consolidation

Advantages of debt consolidation include: 
  • Pay one low interest payment per month instead of multiple payments.
  • Reduce interest rates on credit cards, store cards, overdrafts and loans.
  • Easier debt management. 

Disadvantages of debt consolidation

As with any type of loan, there are some disadvantages to debt consolidation you should consider before applying:
  • If the loan is secured against your home, your property may face repossession if you fail to keep up with your payments. 
  • There might be upfront costs.
  • You could pay more in the long term.

Does debt matter when applying for a mortgage?

Having debt when applying for a mortgage isn’t unusual, but your debt-to-income ratio and your history of repayment could impact how much you’re allowed to borrow. It’s therefore important you find the right mortgage rate for you. That’s where we come in. At TaylorMade, our experts search the market to find the best rate possible, assisting you with each piece of paperwork. For more advice on debt consolidation and getting a mortgage, please get in touch with one of our friendly brokers here.
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If you're unsure and need some advice just give us a call, our expert team of advisers are available to help you choose the mortgage that is right for you.

0345 305 2540 info@taylormade-finance.co.uk

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TaylorMade Finance Ltd is authorised and regulated by the Financial Conduct Authority.

Complaints:

In the event that you wish to complain, you can contact us by email, telephone or letter.

Our address for this is:
Complaints Officer, TaylorMade Finance Ltd, 4 Church Road, Urmston, Manchester, M41 9BU. Our email address is info@taylormade-finance.co.uk and our telephone number is 0161 776 1089. We will then investigate the issues raised and inform you of our findings. Should you be unhappy with the resolution to your complaint you may contact the Financial Ombudsman Service, who can be contacted at the following address: Financial Ombudsman Service, Exchange Tower, London, E14 9SR.

Email: complaint.info@financial-ombudsman.org.uk
Phone: 0800 0234 567

Your mortgage will be secured against your property.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Our fee for this service is 1.95% of the mortgage balance (minimum £1,295 to a maximum of £2,995 although reduced to maximum £1,995 without debt consolidation). Typically this will be £1,995.