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- Finance adelaide, Home buying adelaide, Home loan, Maximise finance, Mortgage broker, Real Estate Adelaide
Thinking of buying a new home? Before seeking finance it is important to know how your current debts will affect your borrowing power.
Whilst you may have already estimated approximately how much you can afford to fork out per week for a new home loan, you may not realise how your credit cards, car loans & personal loans will have a massive impact on how much lenders will allow you to borrow.
One of the many misconceptions is that having your credit cards paid off will allow you to borrow to your full potential. What many don’t realise is that your credit limit is what will be taken into consideration rather than the amounts you actually owe.
The Reserve Bank of Australia’s figures show that the average Australian has a credit card balance of $3,141. Whilst this amount may seem insignificant when compared to how much you are looking to borrow for a home loan many of the easy to access credit cards that are popular today can attract interest rates of up to 30% per annum. Regardless of whether you have maxed out your card or not, the bank will take one look at your credit limit and you can be sure that your mortgage-borrowing capacity will be reduced significantly.
The reason that banks and lenders look at your credit limit so diligently is because if you have a $20,000 limit but have only spent $3000, you could withdraw the entire amount the next day leaving yourself with a $20,000 debt. So if you want to benefit from your maximum borrowing potential, it is important to cancel any cards you can and minimising the limits on the ones you need to the bare minimum.
Research supplied by finder.com.au displays how your average debts can affect your borrowing capacity:
- If you were to apply for a home loan with an average debt of $32,077, your borrowing power would be reduced by $99,000.
- The average $12,643 personal loan lowers the amount a person in that scenario can borrow by $41,000.
- The average $16,320 car loan shaves off $46,000
- The average $3114 credit card reduces borrowing power by $12,000
Once you have got your cards sorted out you may want to check your credit status rating. The smallest defaults can have a mark on your credit history, and whilst often these can be genuine mistakes, such as a bill being sent to the wrong address therefore resulting in you receiving and paying your bill late, these can put a mark on your credit history.
If you are unsure you can get a credit check by visiting https://www.veda.com.au/. After receiving your report there is also a section on the Veda website to help inform you how to improve your credit score and how to look good in the eyes of potential lenders.
If you are unsure of where you stand and find the process to be overwhelming then consider speaking to a mortgage broker. A broker will discuss your financial situation and help give you advice on the best steps to ensuring your application for a loan is processed smoothly. A broker can also help advise on different options, lenders, rates and packages along with helping you decide on a loan that best suits your needs.
Looking for a good mortgage broker in South Australia? The team at Amkar Real Estate highly recommend booking a free consultation with Joe Tirimacco at http://www.saloanoptions.com/.