Can I consolidate my debt before applying for a mortgage?

You can consolidate your debt before you apply for a mortgage. As long as you always make your repayments, consolidating shouldn’t affect your mortgage eligibility. In some cases, it may even help you get approved.

6 min read
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Does a debt consolidation loan affect getting a mortgage?

As debt consolidation allows you to pay off multiple debts and replace them with a single loan, there’s no reason why it should affect your chances of getting a mortgage.

As long as you’re making at least the minimum repayments each month, a lender would have no reason to look at the loan negatively. If you don’t make your monthly repayments, though, this will affect your credit score which will affect your mortgage eligibility.

This is why it’s important to find a debt consolidation solution that is affordable, manageable and suitable for your circumstances.

If you find a solution fulfils these factors, it may actually work in your favour to consolidate your debts before applying for a mortgage. This is because, in bringing your debt together and repaying it every month, you’re proving your ability to repay credit.

Debt consolidation can also help with your mortgage application because it may help you pay off your debt faster. As a large part of mortgage approval is based on your level of debt, reducing your debt as much as you can before applying increases your eligibility.

How much debt is acceptable when applying for a mortgage?

It’s difficult to say exactly what level of debt is acceptable when you’re applying for a mortgage, because it depends on a number of individual factors. The best answer is just to try and get your debt as low as you can before applying, as this will increase your chances of approval.

Your debt-to-income ratio

A good way to gauge how much your level of debt will affect your eligibility is to look at your debt-to-income ratio. This compares how much you earn with how much debt you have. It’s shown as a percentage of the amount of your monthly earnings that goes towards repaying your debt. 

This is what the lenders normally look at to assess your ability to manage monthly repayments. So, the lower your debt-to-income ratio, the more likely you’ll be approved for a mortgage.

Your credit history

Lenders don’t just look at your current debt repayments. They also consider how much debt you’ve already repaid, and whether the repayments were made on time and in full.

As well as this, they also look at how you came to have the debt in the first place. Lenders will be more lenient of debt that is a result of circumstances beyond your control (like needing to borrow money to repair a fault with your car) than they will of using credit to pay for large, non-essential purchases, for example.

The pros and cons of consolidating debts before getting a mortgage

While consolidating your debts can be a good thing to do before applying for a mortgage, that’s not to say that it’s without risks. Here’s a quick breakdown of the pros and cons of consolidating your debt.


  • consolidating your debt reduces the number of monthly payments you have to think about. Having less payments to consider means you’re less likely to miss one (which can negatively affect your credit score)
  • the one payment, one interest rate, one lender combination makes it much easier to budget and manage your money than having to juggle multiple repayments each month
  • consistently making your monthly repayments for your debt consolidation loan will help to improve your credit score
  • it’s also possible that consolidating your debt will allow you to reduce your debt faster, particularly if you get a consolidation loan with a more affordable interest rate than your existing debts


  • applying for a debt consolidation loan will mean you get a hard search flag up on your credit history. These types of searches can temporarily lower your credit score, which is why it’s important not to apply for credit multiple times in a short period
  • as with any type of credit, failing to keep on top of your monthly repayments will negatively affect your credit score, which will impact your ability to get credit (including mortgages) in the future
  • it won’t solve all of your financial problems. While a debt consolidation loan can be a solid start to repaying your debts in a manageable way, it won’t stop you amassing further debt if you live beyond your means

Remember, the loan itself shouldn’t be seen as the solution to getting out of all debt forever, instead it should be used as part of a wider strategy for money management. Also, if you consolidate your existing borrowing, you may be extending the term and increasing the amount you repay in total.

Alternative ways to reduce debt

If a debt consolidation loan doesn’t feel like the right solution for you, that’s okay. There are other ways to reduce your debt before you apply for a mortgage.

1. Balance transfer credit card

You could consider getting a balance transfer credit card. This works in a similar way to a debt consolidation loan, but you shift your credit card debt onto a new credit card instead of paying it off with the loan.

Balance transfer credit cards come with the benefit of having a single interest rate and a single monthly payment, just like a debt consolidation loan. However, it’s important to note that interest rates on balance transfer credit cards can sometimes be higher than those on loans, so you may end up paying more in the long run with a credit card.

2. Ask for a lower interest rate on your credit card

It may sound a bit intimidating, but you’re allowed to ask your lender for a lower interest rate. Having a high interest rate can mean it takes much longer to repay your debt, as a portion of your monthly repayment is going towards paying off the interest, not just the balance.

If you’re struggling, and/or you have a good payment history with your lender, you may be able to negotiate a lower interest rate with them. And if they say no, it won’t do your credit score any harm.

3. Budgeting and creating money saving plans

It might sound obvious (and it’s often easier said than done) but reassessing your finances and updating your budget may just help you reduce your debt faster. Making a comprehensive list of all of your outgoings (including even things that feel tiny, like the 79p per month for iCloud storage) and being strict with yourself can help you cut back in ways you may have not even thought of.

It also gives you the chance to be creative – maybe you’ve been with your energy provider forever, but you could be getting a deal elsewhere. Having a shop around could save you a little here and there that’ll help you reduce your debts in the long run.

4. Snowball method

This method allows you to pay off your debts one at a time, and utilise the money you’ve been using towards them once you’ve paid them off. You start by focusing on paying off your smallest debt (whilst maintaining minimum repayments on your other debts).

Once you’ve done that, you use the money you’ve been spending on the repayments to top up your repayments for the next smallest debt – and you keep going like that until you’ve cleared all your debts.

It’s a strategic method that’s both motivating and effective, because you prove to yourself that you can repay your debt while doing just that.

Read on for more information on all these ways of reducing debt and more.

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