To loan or not to loan....?

[Twinmama32]

Our mortgage comes up for renewal after a 2yr fixed deal. We want to borrow more on our mortgage this time round, to extend the back of our house so we need approx £75k to finance it. We are working hard to get out of overdraft and clearing credit cards before we put the application in the new year. However, we still will have a £12k loan which we are paying off steadily at this point but it will not be gone by renewal. Would it be best to (with parents help) clear the Loan so we seem to be in our best financial position in the banks eyes and thus pay parents back once we get mortgage? Or should we leave the loan where it is and hope for best possible amount from mortgage deal? What would you do?

Can anyone help?!

Is it possible to say approx what your earnings are? And if these will stay roughly the same for the medium to long term?

It's all about passing the bank's multiplier and credit score tests, really.

What happens of your parents lend you the money and you don't get accepted for the mortgage?

LineyReborn our joint income is £80k. We own over 2/3 of our house and I believe the value of it has increased since we bought it 18months ago as we've added a loft conversion, so hopefully it's worth more as a 4 bed/2 bath than a 3 bed/1bath...

standing if we were refused the mortgage we'd pay them the monthly loan amounts back as we are currently doing now with lump sum top ups when we receive it from our employment. I suppose that would be worst case scenario and we could manage that way as they'd be happy to lend us, however not ideal!

I just can't work out if we'd be more 'attractive' to the mortgage lenders completely debt free or with the remaining outstanding loan which we are paying off and have never defaulted on...?

You will be more attractive with the loan paid off so less credit commitments. However it can take a couple of months to show on your credit file as cleared so if you pay it off, get a letter from the loan provider showing it is paid. Another thing to consider is whether your mortgage provider will question how you have paid off the loan. You will need to speak to a mortgage adviser about that one as different lenders have different policies.