Can You Buy A House While In Debt?

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House door with keys in

For the vast majority of people, owning their own home is one of their foremost life priorities. Home ownership offers a sense of security and stability that is impossible to deny, and owning a property also plays a significant role in most families plans for the future. 

However, for some families, there appears to be a block on their road to owning their own home: unsecured debt. As the cost of living increases, unsecured debt continues to rise across the country, which in turn leads many to assume that they cannot realise their home ownership dreams while their debt is still in place – but is this really the case? Let’s find out. 


The simple answer

Yes, it is possible to obtain a mortgage and buy a property even when you are in debt. 


The more complex answer

It is definitely possible to buy a property when you are in debt, but it is not necessarily simple to do so. 

First and foremost, the amount of debt you have as a percentage of your income is an important factor. This is known as your “debt to income ratio”. Here’s how to calculate this


  • The amount you pay to debts every month 
  • Divided by your income each month
  • Multiplied by 100


So if you repay £500 to debts each month and earn £2,000, your debt to income ratio would be 25%. This would be acceptable to most mortgage providers, who usually look for a debt to income ratio of less than 40%. If your debt to income ratio is above 40% then you may still be accepted; ask your lender for more information. 

Secondly, lenders will also look at the type of debt you have. If you have any short-term loans outstanding, then paying these off before applying for a mortgage would be advisable. 


Tips for buying a property while in debt 


  • Repay whatever you can. If you have any extra space in your budget at the end of the month, use the unallocated funds to pay off your debts rather than saving more towards your deposit.
  • Avoid consolidation. Consolidation is a common recommendation for those with unsecured debts, but can be problematic if you are hoping to purchase a property in the near future. If you apply for a credit card or loan to consolidate, then this will impact your credit score, which could make securing a mortgage more difficult.
  • Set reminders to make sure all repayments are made. Missing a payment date for any of your debts can be particularly harmful if you are intending to apply for a mortgage, so set reminders for each payment and make sure they are made on time each month.
  • Use the time you have. Paying down debt and saving for a deposit can be a lengthy process, so use the time you have available to research potential neighbourhoods, check Conveyancing Store to find a solicitor to manage the legal side of your purchase, and even declutter your home so your eventual move will be as simple as possible.


In conclusion

Even if you have debt, obtaining a mortgage to buy your own property could still be within reach.

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