You can get a mortgage with debt. Lenders do not expect every applicant to be debt-free, and there is no fixed amount that is automatically acceptable. They assess your balances, monthly repayments, income and credit history.
Existing commitments can reduce mortgage affordability, while high credit utilisation or missed payments may limit your options. This guide explains how lenders assess debt and how to prepare your application.
See how debt affects affordability
DEBT REPAYMENTS
Add up your monthly debt
Total your loans, credit cards, car finance and other repayments to see how much income is already committed.
CREDIT USE
Check how much credit you use
Compare your card balances with your available limits. High credit use may make some lenders more cautious.
CREDIT HISTORY
Check your credit record
Look for missed payments, defaults or errors and correct anything inaccurate before you apply.
AFFORDABILITY
See what you can afford
Subtract bills and debt repayments from your income to see what could comfortably go towards a mortgage.
How much could you borrow?
Use our affordability calculator for a quick estimate.
How lenders assess debt
During a mortgage affordability assessment, a lender compares your income with your regular costs. Debt repayments reduce the amount left for a mortgage.
Lenders may check the balance, the required payment and how long the debt has left to run. For example, a loan with high monthly payments can reduce your borrowing. A lender may give less weight to a smaller debt when only a few payments remain.
Affordability and credit history tell lenders different things. An affordability check looks at whether your budget can support the mortgage. Your credit history shows how you have managed debt in the past, including whether you paid on time. Even with a good record, lenders will still count your monthly debt costs.
Missed payments or high credit utilisation could also restrict your choice of lenders.
Which debts do lenders consider?
Lenders review most forms of existing debt. However, each type can affect a mortgage application differently.
Credit card debt
Lenders may look at your balance, minimum payments and credit utilisation. High balances or relying on minimum payments could reduce your mortgage options.
Personal and student loans
Lenders usually consider monthly repayments and how long you have left to borrow. Student loan deductions can also reduce the income available for mortgage affordability.
Overdrafts and buy now, pay later
Occasional use may have little impact, but regular overdraft use or several BNPL repayments can increase monthly commitments and affect affordability.
Joint debts
Lenders may include joint borrowing even if the other person normally makes the payments, because both account holders remain responsible for the debt.
Can you get a mortgage with a loan?
Having a loan does not automatically stop you from getting a mortgage. However, the lender will usually include your repayments when deciding how much you can afford to borrow.
They may look at your monthly payment, outstanding balance and how long the loan has left to run. Personal loans, car finance and hire purchase can all reduce the income available for mortgage repayments. A loan that is due to end soon may have less impact, although lender criteria vary.
Your wider finances matter too. Lenders may consider your income, other debts, regular spending and credit history before making a decision. A mortgage broker can compare lender criteria and help identify options that may suit your circumstances.
How much debt is acceptable?
There is no fixed amount of debt that is automatically acceptable or unacceptable for a mortgage. Lenders usually look at your monthly repayments, your income and outgoings, and how long the debt will continue.
Monthly repayments
Lenders consider how much of your income already goes towards loans, credit cards, car finance and other borrowing.
Overall affordability
They assess your debt alongside your income, regular spending and other financial commitments.
Time left on the debt
Debt due to be repaid soon may be treated differently from borrowing that will continue for several years.
Should you clear debt before applying?
Paying off debt may improve affordability, but using savings could leave you with a smaller deposit. The better option depends on which has the greater effect on the mortgage available to you.
Paying off debt could help
- Lower your monthly commitments
- Improve your affordability
- Reduce your credit utilisation
- Remove repayments from the lender’s assessment
Keeping your savings could help
- Maintain a larger deposit
- Reach a lower loan-to-value band
- Access more deals or better rates
- Retain money for fees and emergencies
Worth knowing
Paying off debt is not always the best option if it leaves you with too little deposit or emergency savings.
How debt compares with your income
Lenders look beyond the total amount you owe. Monthly repayments matter because they reduce the income available for a mortgage and everyday spending.
As a simple personal check, add your required monthly payments for credit cards, loans, car finance and other borrowing. Divide this by your gross monthly income and multiply by 100. If your repayments are £450 and your gross income is £3,000 a month, 15% of your income is already committed to debt.
This is only a guide, not a lender approval threshold. Lenders use their own affordability calculations and also consider household spending, dependants, the mortgage required and how long each commitment will continue.
The same repayment can therefore affect applicants differently. A £450 commitment takes up more of a £3,000 income than a £5,000 income. Reducing a balance may also make little difference if the required monthly payment remains unchanged.
example
A £450 monthly debt commitment uses 15% of a £3,000 gross monthly income.
If you decide to clear debt
Tell your broker and lender
If you plan to clear a balance before completion, tell your broker. The lender may need evidence before excluding the repayment from its assessment.
Check for repayment charges
Review the terms of any loan or finance agreement before clearing the balance early.
Keep your finances stable
Avoid taking on new borrowing or applying for credit before completion, as this could affect your mortgage application.
Prepare your mortgage application
Having debt does not automatically prevent you from getting a mortgage. These checks can help you avoid delays and target suitable lenders.
01
Check your credit reports
Review your balances, payment history and personal details. Correct any errors before applying.
02
Keep payments on time
Continue making every required payment by its due date before and during your application.
03
Gather your debt details
Have recent statements showing each balance, monthly payment and remaining term.
04
Target suitable lenders
A broker can compare lenders whose criteria may better suit your existing commitments.
How Muttuo Mortgages can help
Existing debt can affect mortgage affordability differently between lenders. We can help you understand how it may shape your options.
Review your income and monthly commitments
Compare lender criteria from more than 100 lenders
Understand your realistic borrowing range
Talk through your options
Understand how existing debt may affect your mortgage options and how different lenders could assess you.
Your home may be repossessed if you do not keep up repayments on your mortgage.
