That Home Loan Hub
Welcome to That Home Loan Hub, your ultimate guide to mastering the world of home loans and property. I'm Zebunisso Alimova, here to simplify the complexities of real estate and provide you with expert insights and the latest trends.
Whether you're a first-time homebuyer, an experienced investor, or simply curious about the property market, this podcast is for you. Join me each week as we unlock the secrets to property success and help you make informed decisions. Let's dive into the world of property together!
That Home Loan Hub
Debt Decoded: What Lenders Actually Care About
The myth that you need to be completely debt-free to buy a home stops countless potential homeowners from even trying. The truth? Not all debt is created equal, and understanding the difference could be your key to mortgage approval.
Lenders don't just look at your income and deposit—they scrutinize every financial commitment against your borrowing capacity. That $5,000 credit card you hardly touch? Banks assume it's maxed out. Those seemingly innocent buy-now-pay-later accounts for clothes and electronics? They're chipping away at your borrowing power with every purchase.
Take Ryan and Mel, who came to me with stable incomes and a solid $70,000 deposit, but their car loan and credit cards were roadblocks to their dream home in Port-au-Rouge. After clearing one credit card completely, reducing another's limit, and refinancing their car loan, their borrowing capacity increased by an astonishing $92,000—transforming rejection into approval.
Red flags that make lenders nervous include payday loans, missed payments, and high-interest retail finance deals. In the neutral zone, you'll find student loans and low-interest car loans that affect calculations but aren't deal-breakers. The green zone? Clean repayment history, minimal consumer debt, and proactively reduced credit limits before applying.
Strategic debt management is your most powerful tool when preparing for a mortgage application. Get your credit report early to check for surprises, pay down small balances, lower credit limits even on cards you don't use, and avoid applying for new loans before seeking mortgage approval. Remember—debt doesn't disqualify you from homeownership, but it does determine how much you can borrow and on what terms.
If you're carrying debt and uncertain about your mortgage prospects, let's talk strategy without judgment. One good plan can change everything—and that home you've been dreaming about might be more attainable than you think.
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Debt and home loans, what you need to pay off and what can stay. Can you still buy a house if you've got a car loan, a credit card or afterpay? Let's break it down. Welcome back to that Home Loan Hub. I'm Zibunisa Olimova, your mortgage advisor, mom of four and your personal hype woman for all things finance, and first, home buying. Today we are going deep on something that stresses a lot of people out Debt, specifically, what kind of debt you can get away with when applying for a mortgage and what you need to get rid of. Yesterday Because, spoiler alert, not all debt is created equal why lenders care about your debt, you may ask.
Speaker 1:When you apply for a mortgage, the lender isn't just looking at your income and your deposit. They're also asking do you have car loans, credit cards, buy now, pay later, accounts like Afterpay, zip Layby, personal loans or overdrafts? And it's not because they want to judge you. It's because every dollar going to existing debt reduces how much you can borrow. It's because every dollar going to existing debt reduces how much you can borrow. It's all about servicing whether you can afford the mortgage on top of your current repayments. Now how did it impact your borrowing power? Let's say you're earning $90,000 a year and you've got $15,000 car loan, a credit card with a $5,000 limit and an afterpay balance of $800. Thanks all those Nike shoes. Even if you make all your repayments on time, the bank will factor in monthly repayments on each of those deeds and that can reduce your borrowing power by tens of thousands. Even worse, the $5,000 credit card that you never use, the bank assumes it's maxed. Yep, there it says limit, not balance.
Speaker 1:Now let's look into the case study. Let me tell you about Ryan and Mel. They came to me with $70,000 deposit, stable income and big dreams, but between a $25,000 car loan and the two credit cards was a combined $10,000 credit card limit. Their borrowing power was not where it needed to be. I gave them a plan. We decided that to clear one credit card completely would be a good start, lower the other credit card limit down to a000 and refinanced the car loan to a lower repayment plan. Six weeks later we applied Boom. Their borrowing power increased by $92,000. That was the difference between a no-go and getting pre-approved for their first home in Port-au-Rouge.
Speaker 1:What debt is a deal breaker? Here's a quick guide to what lenders love and what makes them twitch. Now get a pen. Let's go through the red flags. Red flags payday loans, missed or late payments, high interest rate finance deals like Harvey Norman, qcats, etc. And too many active buy now, pay later accounts. Neutral still affects borrowing low interest rate car loans, credit cards with low limits and student loans, especially in New Zealand. They're deducted automatically, but still count.
Speaker 1:Green zone, clean repayment history, low or no consumer debt and reducing limits before you apply. Now you might ask do you need to be debt-free to buy? The quick answer is no. You don't need to be squeaky clean, but you do need to be strategic. A well-managed car loan or a credit card won't necessarily stop you from getting approved. But having five buy now, pay later accounts, a maxed out card and a car loan with four years left, that's going to limit your options. This is where working with a mortgage advisor helps. We can tell you what's hurting your application and whether it's worth clearing or not.
Speaker 1:Now I've got some tips for you. I hope you still got that piece of paper and a pen. Get your credit report early. Check for surprises. Pay down small balances, especially buy now, pay later activities and short-term finance. Lower your credit card limits even if you don't use them. Stop applying for new loans. No new cars, no just-in-case credit cards. And talk to me first before you shuffle debt or consolidate anything. Now, final thoughts from me. Debt doesn't qualify you from buying a home, but it does shape the size of the home loan you can get. So if you're serious about getting into the market this year, let's get your debt in check, clean up your finances and build a strategy that works with your situation, not against it. Thanks for joining me today on that Home Loan Hub. If you've got debt and you're not sure where you stand, send me a message. There is no judgment, just strategy. Hit, follow. Share this episode with a friend who thinks they're too deep in debt to buy, and remember one good plan can change everything. Catch you next week.
