Categories: Mortgage and Housing

Will A Personal Loan Affect My Mortgage Application?

Not everyone can afford to buy an apartment using their own savings and turn to the bank for help to obtain mortgage loans. At the same time, the future borrower may have a question – is it possible to get a mortgage if there is a personal loan. In practice, such decisions are considered by each bank individually. This article provides up-to-date information on whether the presence of a personal loan can affect the bank’s decision when applying for a mortgage.

How does the availability of credit affect the likelihood of approval?

The presence of any credit obligation can lead to refusal of a mortgage loan. The current credit obligations impose certain restrictions on the financial capabilities of the client. That is why the bank must be sure that the client’s paying capability is at a high level. When analyzing client, many factors are taken into account that affect the approval of a mortgage in the presence of an additional loan:

  • The total income of all family members;
  • Possibility of attracting co-borrowers;
  • Ownership of real estate that can become collateral;
  • Perfect credit history of the client;
  • The balance of personal funds that remain after the repayment of all loans, including the mortgage, is calculated – the amount must be at least 50% of the total income.

Thus, banks conduct a detailed financial analysis before finally approving a mortgage loan to a client with additional credit obligations.

How does having an unpaid mortgage affect?

If a client has a situation where he needs to take out a mortgage with an existing home loan, in most cases banks do not take such risks and may refuse to re-lend. Most often, in such a situation, the client may be advised to sell the first home taken out on a mortgage, and only then apply for a new home loan.

Some banks may make concessions and issue a new loan commitment, but the client’s income must be appropriate – after paying off the monthly payments on two mortgages, the remaining amount must be at least 50% of the total income.

In this case, the client will need to make a significant initial payment when applying for a second home loan.

Can I hide a previous loan?

When applying for a mortgage loan, it is important to provide accurate and reliable information – if there are any factual errors, the bank will reject the documentation. If the borrower is really interested in concluding a long-term agreement, it is important not to deceive the bank and indicate the presence of all loan obligations in third-party financial systems. All information is verified through a special service available to all banks, which fully discloses the credit history of any client, and provides information on the presence of all outstanding loan delinquencies.

It is possible to hide the existence of an existing loan only if the employees of the financial institution did not have time to submit data to the credit bureau. Although these cases are rather an exception since specialists enter all the necessary data on existing loans in a timely manner.

Possible consequences

The banking organization that received the application processes the documentation within a few minutes. If incorrect data is indicated, the bank has the right to reject any incoming documentation. By agreeing to the processing of personal data, the client grants the bank the right to examine in detail the existing credit history, which contains detailed information on the availability of existing loans.

Some banks may immediately add clients who knowingly indicated incorrect information to a special blacklist of potential borrowers. At the same time, it will be quite difficult to get the next loan from this financial institution.

When registering a mortgage loan, a special scoring system is used – when a certain number of points is awarded for each item in the client’s questionnaire.

In addition to the standard set of “qualities” – the client’s solvency and income level, the bank also assesses the availability of other loans and provides additional points for their absence. The scoring results can affect the approval of lender when registering a mortgage, therefore, if there are existing debt obligations, the client may simply not collect the required number of points.


Some banks are quite strict about the availability of additional loans when applying for a mortgage and directly indicate the limitation on this item.

It should be noted that in many cases the client can be accommodated and consider some compensating factors – for example, when making a large down payment, as well as having an impeccable credit history of the client. Also, the situation may depend on the general strategy of banks in the existing financial situation in the country. Credit institutions are constantly increasing their competitiveness, so it is quite possible that even in banks with strict requirements, mortgages will still be approved.


Olivia Chloe

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