Question: We have saved up a considerable deposit and are looking at purchasing a house within the next 12 months; however, our situation is a bit complicated. My girlfriend has a clean credit report but I have a bad credit report as a few years ago I entered into a Part IX Debt Agreement. I never missed a payment and was offered an early discharge, which I accepted as an act of goodwill. What type of loans should we be looking at? Also, we are looking at buying a new car as well. What is the best way to get this included as part of the loan?

Answer: The first thing you should do is get a copy of your credit report to see how ‘bad’ it actually is. A Part IX Debt Agreement represents a low-cost, flexible alternative to bankruptcy and any listing on your credit report may have been removed depending on how much time has passed and the severity of the situation at the time. Once you have your report, you should talk to your broker or lending institution to see what effect your past financial history might have on any application you make.

If you are unsuccessful with the traditional lending institutions, you may want to consider using a non-conforming lender who specialises in lending for situations outside of the norm. Their rates and fees will be proportional to the level of lending risk they consider you to be – the higher the risk a borrower is, the higher the interest rate and fees may be.

Most lenders will allow you to include a portion of your loan for a car, etc, however, this will vary from lender to lender and will depend on a number of factors. These factors include how much deposit you have, the amount you need to borrow for the property and the maximum lend available to you. Depending on how much you want to spend on a car, you may be better off getting an unsecured car loan separately and using your mortgage and deposit to secure the property.

When you get enough equity in your mortgage, either through capital gain and/or by paying down your mortgage, you can then look at refinancing the car loan into your mortgage.

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