Hi everyone, my situation is I currently have a $30k personal loan (paying about $720 a month with ING, 4 years to go). Me and my partner are saving up for our first house and plan to have $100k minimum in ~2 years, and based on our salaries would be looking at a house for around $1m.
My question is - am I better off paying out the personal loan and having $30k less towards a home deposit, or keep making the minimum repayments and consolidate it into a home loan?
Yes pay it off or consolidate? Able to elaborate?
Pay it off.
Yes pay it out.
I can't fathom any lenders looking favorably on a an existing 30k personal loan. It just stinks of inability to manage finances (whether thats true or not, it doesnt matter)
Best to check with a broker or a Bank mortage rep.
Outstanding loans and credit limits are counted as amounts already borrowed and factored against your repaying capacity.
Also, you can check some borrowing calculators (like on ANZ, CBA or NAB website) to see how much of a difference this loan makes in your borrowing capacity.
so you want to buy a 1m house with 70k deposit ?
If 2 people can save a 'minimum' of 100k in 2 years, I would look at a 30k personal loan unfavourably.
Why would they even need a 30k loan if it would take them less than a year to save up for that amount?
they have 0 saved at the moment
smash avo
30k is an outstanding personal loan that was unpreventable for a personal issue.
About 10k currently saved, combined income ~$200k but this has only been for a short time. We live very modestly and are strict with budget.
The lesser your deposit for the house then the higher LMI you will be charged
Yes this is my concern
The Counter is that the personal loan will affect how much you can borrow or affect your loan approval entirely.
Pay down your debt - any debt you have.
Save for the deposit.
You will be better off as your LMI premium will be lower.
https://www.genworth.com.au/lenders/lmi-tools/lmi-premium-es…
Have you actually talked to anyone about your capacity to borrow?
Even on a household income of 200k, $850k is a lot of money to pay back without factoring in risk (such as interest rate increase or the personal reason you borrowed 30k that you haven’t managed to pay off yet)
A good mortgage broker can advise on what’s realistic.
You should talk to a mortgage broker or your bank about the difference.
If borrowing capacity isn't an issue then by paying off the loan you will end up with less deposit so will pay more in LMI.
If borrowing capacity is an issue due to the existing expenses of your personal loan then it'll be straight forward that the solution is to pay off the personal loan first.
You need to know the figures to be able to determine what is best for you.
You might be right that there are circumstances where not paying of the personal loan a.s.a.p is financially beneficial but it's completely bonkers. It's strange enough that it can be right in some circumstances to pay off HECS before getting a home loan.
That's right, it's all about responsible lending and borrowing capacity. You could owe $500 in HECS to the ATO and the bank will still assess your repayment rate for your HECS debt based on your salary as an ongoing monthly expense. So if you earn $100,000 that would be 7% of $100k/12 as your monthly HECS expense.
Yes