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This question is about whether a house mortgage "on its own" would improve a persons chances to qualify for a personal loan. With this I mean, does a house loan provide benefits that, simply because of having such a loan (with payments made on time, of course) vs. renting, would make a lender more willing to grant a loan?

For example, please consider these hypothetical situations:

  1. Person X, a 30 year old male, has a house mortgage that he has been paying for 3 years. He owns $80K USD on a house valued at $100K. His monthly payment is $2000 USD.
  2. Person X, a 30 year old male, has a house mortgage that he has been paying for 3 years. He owns $60K USD on a house valued at $100K. His monthly payment is $2000 USD.
  3. Person X, a 30 year old male, has been renting a house for 3 years. His monthly rental payment is $2000 USD.

For the sake of simplicity, the person has no other debts and now he wants to apply for a personal loan (from some reputable bank) for $30K USD. Would situation #1 automatically be better than situation #3?

(Here I purposely made the personal loan larger than the difference between the debt/value ratio in situation #1. But what if the debt/value ratio was like in situation #2?)

Are there much benefits from house ownership when it comes to qualifying for personal loans from banks?

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  • you might consider an edit to assign different letters to your 3 people above. Else, one can't respond, "for person X, his situation appears to....." as they all have the same name.
    – JTP - Apologise to Monica ♦
    Dec 26, 2014 at 14:04
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    Any lender is going to look at your FICO score(s), and having a mortgage but nothing else is rather atypical and probably NOT going to result in a very high score - only slightly higher than the person renting in your examples.
    – Norm
    Apr 24, 2018 at 19:20

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Having an existing credit history, like that of a mortgage is only a very minor plus.

At the end of the day a lender will mostly care about three things:

(1) Is the loan collateralized?

(2) What is the income of the borrower?

(3) What is the reputation of the person? (ie, somebody noone has ever heard of with a previous bankruptcy, or a well-respected member of the community who has been living in the same place for 40 years and a good credit record)

If you have equity in a home, you can use it to obtain a collateralized loan.

Your credit history goes towards (3) above. A lender may ignore bad credit, if for some reason you have a good reputation otherwise. Vice versa, if you have a bad reputation (for example, you are a convicted criminal), no amount of good credit reports will help you.

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I'm not sure what is "better" in your view.

The only benefit of having another loan on your credit report is the existence of your credit report, credit history and credit score. If you have no debts whatsoever - you have none of those things. In the US you're only considered creditworthy, if someone has already given you some credit. No-one wants to be the first.

So from that perspective, having a mortgage is better than not having any debts at all.

If you have a good solid credit history and a high credit score as it is, I don't think that having a mortgage will make you look "better" to the lender in any way. If at all, if you have secured debt, that debt is much likely to be repaid than unsecured one, so getting a personal loan will be much harder than getting a mortgage. Especially if you are already in debt.

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