If i get a mortgage can i put my financial debt into it?

Question

I owe £20,000, if i get a mortgage on a house would it be possible to pay of my debt with the mortgage i would be allowed to borrow. So if i am allowed £120,000 and i find a house for £100,00 can i use the remainder of my allowance to pay of my debt. Is there a lender who will do this. Thanks

Answer 1

Yes, you can usually do that, but it is not always recommended.

The key for the lender is the equity that you have in the house. The equity is the difference between the money you have invested in the house, which is a combination of cash input and its current market value, measured against the loan amount.

This means they will want to see the real value of the house, for which they will send an appraiser to the home to do the evaluation.

If this is a new home purchase, as it appears, then you should speak to the lending institution about it. They may offer an option of two loans, one for a mortgage and a second one at a lower interest premium than you are presently paying.

Some institutions like doing this, as it increases your total long-term debt and thus their long-term profit, while others show that you will be paying the current loans over such a great deal of time that the total interest and principle you pay over the extended will actually multiply the existing amount.

If you take this option, be sure it is in your interest to do so. That means you should be seriously looking at prepayment of your mortgage, on a regular basis. Discuss this with the lender.

Answer 2

The amount of mortgage you can get is a factor of two things: (1) how much income you earn and (2) how much the house you're going to buy is worth (usually the mortgage will be for about 70% of the appraised value of the house).

So assuming that you can get a house with sufficiently high enough appraised value so you can tack on your 20K debt on top of it, the bank usually do not mind (more debt for you = more income for them).

The point of concern usually comes from what interest rate you pay on your current debt vs. what interest rate the bank will charge (including fees). if the former is higher, then go for it.