The Australian dream of home ownership is one fraught with difficulty, yet it doesn’t stop the determined few from securing their place on the property ladder. In light of the recent banking royal commission, getting a loan can be a little harder now. If you’re one of those aspiring to home ownership, there’s four things you should be aware of before you apply for that home loan, as declined applications can have a negative impact on your credit score.
You need to be able to afford the repayments, and then some
When you apply for a home loan the bank will not only check if you can afford the repayments and interest rates set today, but if interest rates go up tomorrow or in ten years. Take this into consideration with getting prepped for your application.
Your HECS-HELP debt can affect your borrowing capacity
Your compulsory HECS repayments are factored into the calculations banks make when they evaluate your ability to repay a loan, so if you have a HECS-HELP debt, this may reduce how much you’re allowed to borrow.
You will need to limit your living expenses
There is now a growing trend towards banks asking for a detailed budget of your current living expenses to determine if you are truly capable of repaying your home loan without experiencing financial stress. If they think you’re supplying a number that is too low, they’ll use their own figures gathered from data on the average Australian household living costs.
You’ll need to prove yourself
When it comes to submitting all the paperwork for your home loan the bank or lender will ask you for proof of your living expenses and income. Don’t be surprised if they ask for recent payslips or a tax return if you’re self-employed. Identity documents such as a Medicare card, drivers licence or passport and copies of your current credit card and loan statements can be requested if you have them. The lender may also ask for proof of outgoing expenses or rates notice.
All the advice in this story is general in nature and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.
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