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Q.  When applying for a home loan, what would be considered a suitable amount of debt? I have a few contracts and ongoing bills and I’m not sure if it would be considered too many in the eyes of a lender. 

A. Having too many financial commitments can potentially damage your home loan application, so it is important to limit the amount of debt you have. Everyone’s situation is different, so a lender will need to assess your application personally. However, there are some signs which may indicate you have too much debt. Some examples include: 

•    You don’t know how much you owe
•    You can only afford minimum repayments for bills
•    You cannot obtain new credit
•    You borrow money to repay bills
•    Expiring interest free facilities
•    You cannot save money
•    Your finances are affecting other areas of your life

If some, or all, of these examples apply to you, it may be wise to get your finances in order before applying for a home loan. Firstly, write a list of all of your financial commitments and start cancelling contracts that are not essential. Commitments such as paid TV and gym memberships are a lot easier to cancel compared to car, personal and home loans. Secondly, you will need to prioritise your bills. Pick the debt with the highest interest rate and put as much extra money as you can towards paying it off.

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan