Personal loan - impact on mortgage application

Hello there,

I have a quick question to ask. I had a personal loan with bank of ireland amounting to 13k. This had become a big hinderance when I tried applying a mortgage to get on to property ladder. In this regard a friend of mine provided some cash(7k) to part clear my loan. In order to give the money back to my friend, can I apply for a loan once I am inside the property. I mean to ask if the banks will be obliged to provide loan or not???

or will I be able to get some money on mortgage???

Regards,

Pint

Re: Personal

You can apply for a loan at any time, but whether you get it is another matter. If I may say so, and without sounding patronising, this is probably the wrong way to go about things. I think what you are saying is with the equity in the house (once you get into it ) you would like to borrow on the strength of that. That would be remorgaging and you would have to wait a time before you can do that.

Taking out an ordinary loan from the bank is probably too much on top of paying a mortgage. I dont know what you earn? but unless you are head of ICI, and taking into account all your other outgoings, the bank may feel you are overstretching yourself. A better way of doing things is to delay buying the house until your friend is paid back and any other debts as well are cleared that way you can start with a clean slate.

You only have to read some of the other threads on this site to see how people get themselves into trouble with debt which they can't get out of. Best not get in that situation to start with. Plan ahead is the best way.

Re: Personal

Thanks for your reply.

No No, i am not talking about re-mortgage. I am just looking for another loan just to pay off my friend. While my mortgage cheque is issued to me can I ask the mortgage lender to provide some extra cash?

Regards,

Pint

Re: Personal

Well I doubt if you can ask the mortgage lender to provide extra cash unless it is for repairs or something like that. They will want to know what it is needed for. You might want to go on holiday with the cash ( I know you dont ) but the bank needs security for the loan, if you see what I mean. Are you saying the bank wont give you the mortgage while you have a loan outstanding?

Re: Personal

A mortgage lender will only advance you the funds to purchase the property, they will not provide any funds to repay other loans, unless you are remortgaging a property you already own. your best option is to reapply for the loan once the mortgage has issued. But be aware that according to your mortgage lender you cannot afford the personal loan and the mortgage, so you will be exposing yourself to being over committed on your borrowings.

Re: Personal

Pint6. I know what you mean that 7000€ is not a lot of money compared to what you can get on mortgage. But as the previous post says you will only get from the mortgage people what it takes to buy your house.

In my experience of buying (in England ) the money draft goes to the solicitor and you never get to see the money anyway. As I said you might be able to negotiate a bit extra for repairs to the house ( does it need any?) have you had a survey done ? Look into this ( thats if its not a new house ) Then get a couple of estimates! Go back then and talk to the Bank.

Re: Personal

I'm not 100% clear - has your mortgage been approved? Basically, a bank will look at your overall outgoings & will want to see that they do not amount to over 40% of your after tax income. So, that's why the loan was an issue. It's not the amount as such but the fact that the loan repayment plus the mortgage takes you over the 40%

Did the bank approve the mortgage once you had cleared 7k from the loan?

Sorry for all the questions......what you may find is that you can apply for a loan for 7k (or whatever) once you have the mortgage & are in the house. Lending criteria tend to be less strict on personal loans than mortgages.

Re: Personal

Sorry if I'm taking this off topic - moneyhoney, I hadn't heard that about the 40% before (not looking at buying a house at the moment though so wouldn't necessarily be up to speed on all aspects). Is that 40% supposed to include rent you may be paying?

Re: Personal

Only if you were paying rent & the mortgage at the same time - which I presume you wouldn't......the 40% is to ensure that your total loan obligations won't be too much of a burden. It's just a rule of thumb that some lenders use. Some may set it at less than 40%

Re: Personal

Thanks for all your advises and replies.

I am approaching several banks for mortgages. The only hinderance is my loan which I am servicing regularly. This is with BOI. I was advised by couple of mortgage advisors to clear off the loan, so that I can handsome mortgage. They advised me two ways :

1. to manage some cash from friends and relatives - this I could not do because as you know it is seldom people having so much cash.

2. They advised me to clear off partly - which I have done borrowing money from my friend.

Now the question is of giving the money back to my friend. I am in the verge of getting mortgage approval in a day or two. The only question whcih is pestering me is retruning the money back to my friend.

I need your advise on this.

REgards,

Pint6

Re: Personal

No offence but it sounds like you are really stretching yourself if you are maximising your mortgage borrowings and also borrowing from friends for other purposes. Perhaps you need to rein things in a bit and maybe look at borrowing less? If it was me then I would be looking to sort the friend out before incurring additional debts. On the other hand if it was me I would not borrow from friends/family because I've been on the other end when things turned sour and vowed never to get involved in such transactions ever again.

Re: Personal

Be aware that mortgage approval has a life span of approx 6 months. (Builders are very bad a guessing the expected date of completion of a property). If your property is not ready and the mortgage cheque is not drawn down then you will need to reapply and if you have a loan outstanding then you will have to clear this new loan prior to getting mortgage approval in 6 months time.
In the meanwhile try paying off your friend.
You could try applying for a loan when you get into the new property but be aware of what other posters are saying
Don't overstreach yourself.

Re: Personal

Thank you very much.