Have you found a house you would love to buy, but are unsure if your debt will affect your mortgage eligibility? From student loans to bankruptcy, let’s get a deeper understanding of how debt may affect your chances of getting a mortgage.

Your debt isn't the entire picture

When it comes to how you think about debt, you need to understand that it’s actually very commonplace and shouldn’t be deemed in a negative light. It’s how you manage your debt that’s the most important, as lenders will be scrutinising how responsible you are in terms of paying it on time each month.  

Before you look at your debts, it’s important to consider your income and additional expenses. Mortgage lenders look at the bigger picture, so if you can afford to repay your agreed debt payments and have spare capital, this could improve your chances of getting your mortgage approved.

Debt does affect how much you can borrow - there’s no getting around that. However, it helps if you can demonstrate affordability for a mortgage by having reduced expenses, or a large income with plenty of monthly free capital. 

Your income, expenses, and the ability to make your debt payments matter to lenders. Proving financial responsibility and stability can improve your chances of eligibility.

What is classed as a debt for mortgage purposes?

Understanding what mortgage lenders consider as debt will help you to eliminate or reduce the risk of being rejected for a loan. If you have existing debts, you may need to spend time focusing on paying these off before you continue to build on your deposit.

Debts can include things like:

  • Student loans

  • Credit cards (and store cards)

  • Car finance

  • Mobile phone contracts

  • CCJs or IVAs

  • Bankruptcy

So, which debts do you have, and how will they affect your mortgage application?

Student loans

The Student Loans Company is a Government-backed financial scheme, with loan repayments taken from your pre-tax salary each month – so this shouldn’t cause an issue in the eyes of mortgage lenders.

If, however, you took out other loans (such as commercial) while you were a student, this could affect your eligibility for a larger mortgage loan. It all depends on how large your student loan was, whether you’ve repaid every monthly payment on time and in full, and how much time is left on the loan term.

Credit cards

When you pay your credit card on time, you can improve your credit score and become more responsible in the eyes of the lender. As with any form of debt, it’s more about how responsible you are with your credit card that can impact your overall score. 

For instance, if you always have maxed out credit and only repay the minimum each month, mortgage lenders won’t look kindly on that. However, spending around 20% of your total borrowing limit each month, before paying it off in full, on time, every month shows you’re responsible with credit.

Car finance

Cars are expensive, and mortgage providers know that. They’re also fully aware that they’re essential for most people to get to and from work – and without a job, you wouldn’t be able to pay your mortgage!

It’s a steady debt to have in order to eventually own something at the end, and it’s in your interest to pay each monthly payment in full and on time. If you can prove to lenders that you are consistently meeting your car finance payments, this should demonstrate that you are capable of managing your debt responsibly.

CCJs and IVAs

A County Court Judgement (CCJ) or Insolvency Voluntary Agreement (IVA) will have a serious impact on your ability to get a mortgage. However, it’s important to note that both CCJs and IVAs are not forms of debt - they are a legal means for creditors to ensure that they’re repaid the money they are owed.

There are very few lenders who will take someone with a recent CCJ or IVA to their name. Unless you have an exceptionally large deposit, it could be difficult to get a mortgage. That being said, it’s not impossible. Speaking to a mortgage broker is the best course of action, as they will be able to tailor your application to lenders who are more accommodating of complex financial needs.


A current bankruptcy, and the six years following the declaration, will prevent you from getting a mortgage from almost all lenders.

While it may be difficult, it’s important to stay positive. There are a handful of mortgage providers who will take discharged bankruptcies from as little as one year after the declaration (and it’s important to note that the likelihood of acceptance increases the more time has passed, and that you will be charged a higher level of interest).

A mortgage adviser will have access to unique deals that you may not find if you apply for a mortgage on your own, so it’s well worth taking advantage of their expertise.

Identify large events that caused the debt

Mortgage lenders need to know why you’ve got debt. Some debt, like student loans, are easily recognisable. Meanwhile, others, such as one-off payday loans, need more explanation.

Lenders offer loans on a case-by-case basis. If, for example, you changed jobs and your car broke down before your first new paycheck, that would explain why you needed a short-term loan one time.

However, if your credit and loan history shows a pattern of borrowing from several lines of credit and over a longer period of time, this shows your spending habits aren’t caused by one major factor. Lenders are less likely to look favourably on these types of habits.

How to improve your chances of getting a mortgage despite your debts

If you’re in debt and are worried about your chances of getting rejected for a mortgage, the good news is that there are steps you can take to rebuild your financial health and boost your credit rating.

  • Check your credit score

  • Don’t miss repayments

  • Avoid applying for credit before a mortgage application

Check out our article about improving your credit score for a detailed overview of the steps you can take:

Get expert mortgage advice

Nobody knows how to navigate the world of debts and mortgages better than your mortgage adviser. They’ll offer advice and tips to help you improve your credit score, along with other factors that may affect your mortgage eligibility. 

They’ll also let you know if your application is likely to be accepted, or whether waiting a few months or a year would be better. Our advisers are on hand to help guide you through the process, talking you through your options if you are currently in debt, so make sure to get in touch for a free, initial, no obligation consultation.

Important information

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

There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.

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