The common mistake that kept a hard-working tradie from getting a mortgage – as an expert reveals five things you should do before applying for a home loan
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A mortgage expert has revealed the one simple reason many Aussies get turned down for a home loan and shared some simple tips to help you get approved.
Andrew Campbell, a Perth home and land specialist, warned prospective homeowners to think twice before spending money on a new car.
Mr Campbell said taking out a $15,000 car loan or personal loan could reduce a person’s borrowing capacity by an eye-watering $100,000.
He said a man in his 20s was bitterly disappointed after applying for a home loan shortly after borrowing money to buy a new Ford Ranger.
Mr. Campbell said his borrowing capacity plummeted from $600,000 to about $200,000 because the vehicle is a depreciating asset and requires high interest payments.
He told Daily Mail Australia that in the eyes of the bank, these higher repayments meant the applicant had less excess money to pay back the home loan.
“I was talking to a young guy the other day who was making $112,000 a year. Single man, no other commitments.
And I thought, no problem, this guy could borrow about $600,000 for his first home,” Mr. Campbell explained.
Andrew Campbell, a Perth home and soil specialist, warned prospective homeowners to think twice before spending money on a new car
And then he told me he just took out a brand new $80,000 car loan for a Ford Ranger.
So his borrowing capacity went from about $600,000 to about $200,000 or probably less.
“If you’re thinking about buying a new car, look at your own home first, because it’s very easy to get a new car loan later on, once you’ve paid off your mortgage and you’re comfortable with them.”
‘Then you can calculate what you can pay back on a car loan.’
Mr Campbell said if first-time buyers buy a car before taking out a home loan it could ‘drastically’ reduce their borrowing capacity.
He said banks would consider all debts before approving a home loan, which in turn could reduce the number of homes available to the applicant.
“You can have some debt, but it will hinder your borrowing capacity,” he said.
Mr Campbell said people wanting to enter the real estate market should make sure they have no unpaid bills and good credit.
It’s also good to remember that when you buy your first home, it’s not your forever home. Make sure it’s something you can afford and don’t go overboard by adding flashy add-ons like floor-to-ceiling tiles or high ceilings,” he said.
Mr Campbell (pictured with a customer in April) said if first-time buyers buy a car before taking out a home loan it would ‘drastically’ reduce their borrowing capacity
A developer has urged new buyers to take out a mortgage before buying a new car (pictured a Ford Ranger, one of Australia’s top selling 4WDs)
He encouraged start-ups to keep a “clean plate” by not going into an overdraft on any of their bank accounts and maintain a stable income.
Mr Campbell said the majority of his clients were young Australians in their 20s and 30s eager to get out of renting.
“They’re paying a high rent, so they might as well be paying a high mortgage,” he said.
“It’s a better financial decision to buy a house than a car.”