Repaying personal loans - depending on what you took them out for - may give you a better chance of getting mortgage approval, an expert has said.
Personal loans might be a way to demonstrate your repayment ability, but Irish Mortgage Corporation Sales Director Liam O’Connor warned that can vary across lenders. He told Dublin Live: “Some lenders can have a view that, well, if it's a car loan that you're paying off, they can't really take that into consideration. They're going to need to have a car. Even though you might pay off a car loan today, you'll probably be taking another car loan in the not too distant future.
“It's also one of the benefits of dealing with somebody like a mortgage intermediary or a mortgage broker who has access to the different lenders and can obviously recommend the lender that is more suitable to the customer's need.”
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Mortgage experts are noticing that key rates are increasing as a result of the credit assessment that lenders are doing. Mr O'Connor said: “If you are looking to raise a mortgage, I'll just use a figure of €300,000 over, say, a 30 year term.
"That mortgage might have only cost you a year ago €1200 per month. If that mortgage is costing you now 1,500 per month, what the lenders are looking to see is that you have in effect demonstrated repayment ability by way of savings or rent, for example of now €1500 euro, which would've been a year ago €1200 each month for the proceeding six months.”
According to Mr O’Connor, that's one of the biggest things that would be impacting on somebody's ability to rate a mortgage now. He said he’d usually tell customers like that: “You're not ready to obtain a mortgage now.
"These are the things that you need to do over the next six months so that you are mortgage ready in six months time, and one of which is we need to demonstrate your repayment ability by way of you either in rent and savings you're doing without a figure of whatever that figure is, which is a higher figure than what it was 12 months ago.”
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