In this brief guide, we are going to answer the question “how long after clearing debt can I get a mortgage?”

How long after clearing debt can I get a mortgage?

You are able to get a mortgage as soon as you have cleared a debt but you may want to wait until this is reflected on your credit file so the mortgage lender takes this into account when calculating your debt to income ratio and your mortgage affordability.

You can check your credit score and check to see if the debt you cleared has been reflected on your credit profile before applying for a mortgage.

Most credit providers usually report data to the credit bureaus each month and hence waiting at least 1 month before applying for a mortgage may be a good choice.

If you are unsure of what your credit file is displaying then you should check your credit score from the four credit bureaus in the UK: Experian, Crediva, Equifax and Transunion.

Some of these credit bureaus may charge you a fee to view your credit report so what you can alternatively do is request a statutory credit report which is a free credit report which each credit bureau must provide to you upon you requesting it.

Alternatively, you can also use credit score services such as Checkmyfile and clearscore to check your credit report.

You should be sure to check with all fou UK credit bureaus to ensure that the debt has actually been marked as settled on all four UK credit bureaus as you may not know which one the mortgage lender is using to assess your creditworthiness and mortgage affordability.

Can you get a mortgage with outstanding debt?

Yes, you can get a mortgage with outstanding debt. Each mortgage lender may have its own rules and guidance on how much debt they are willing to accept in relation to a borrower’s gross monthly income. This will usually be defined by the mortgage lenders debt to income ratio cap.

Should I pay off debt before applying for a mortgage?

Whether you should pay off debt before you apply for a mortgage or use the money you would have used to pay off the debt to add to your mortgage deposit will depend on the opportunity cost of taking either action.

You may want to consider both in line with their pros and cons.

E.g how much will you save in mortgage interest by putting a bigger mortgage deposit down in contrast to how much you will save in interest on interest on your debts as well as how paying off your mortgage debt may affect the mortgage rate you get on your mortgage.

How much debt is acceptable for a mortgage?

There is no magic figure on how much debt is acceptable for a mortgage. Each mortgage lender will have their own debt to income ratio cap and will usually only lend to borrowers who fall beneath this cap.

If you are worried about how your current debt may affect your ability to get a mortgage then you may want to speak to a mortgage broker.

Use a mortgage broker

You may want to consider using an independent mortgage broker to get a mortgage.

Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases.

This could be over 11,000 mortgage products. This may have some advantages rather than going directly to a mortgage lender.

A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you based on your mortgage affordability.

After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. 

This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your mortgage is indeed a possibility before you make a full mortgage application. 

Once you have found a home you want to buy and are satisfied with the mortgage offer for your mortgage then the mortgage broker will then look to get you a mortgage offer.

This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month.

It will also contain information on if there are any limits such as early repayment fees, or annual overpayment limits.

If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.

Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it.

They will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.

In this brief guide, we answered the question “how long after clearing debt can I get a mortgage?”

John Bate

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.