If you are considering buying a house, you will likely need a home loan. If you already owe on previous advances, whether higher education debt, credit card debt, or personal loan debt, it could impact your home loan application.
Australia has some of the highest household debt in the world. The average household debt is $250,000, according to a recent report from Finder. The ratio of debt to income is 212 per cent, meaning that if a person is earning $80,000 per year, they are spending $169,600.
So, how much does this debt affect you when applying for a home loan? Here is a brief look at each most common type and their possible effects.
Higher education debt
It is common for Australians to have student debt under the Higher Education Contribution Scheme (HECS). The average four-year bachelor’s degree costs between $18,000 to $30,000, according to the Australian Scholarship Group (ASG). The guidelines of the HECS are such that your employer will begin to take out percentages of your salary once you reach an annual income of $51,309.
When applying for a home loan, lenders will see these numbers and may make decisions accordingly. Because your salary will be reduced to make student loan payments, that means you’ll have less borrowing power. This could have negative impacts on your loan application, especially if you have other forms of debt on top of it.