As financial advisers we see a lot of people that may want to buy their first home, but first they need to pay off their debts – credit cards, store cards, hire purchase, personal loans and vehicle loans.
Some of these may be interest free, or may have started as interest free – but they are still debts.
Others may be quite expensive debts with high interest rates and fees.
When you are getting ready to buy your first home then you want to be presenting yourself in the best possible way so those lenders will feel like you are a good applicant, and of course “approve” your home loan application.
One thing that you can do not is review any debts that you have.
It’s Time To Review Your Debts
It’s always a good time to review your debts, and the sooner you do it the sooner you know if there is a better option that might save you a lot of money and/or help you pay your debts off faster and buy a home more quickly too.
The good thing is it costs you nothing to have a look at your options.
It costs nothing to review your debts and go through an application to see if you can get something better than what you are currently doing.
Can you get a better deal?
Often the lenders that offer you “easy money” are the lenders that charge more, and there are some store cards and loans where the standard interest rate is 25.99%
You do not need to stay with expensive debt, and there can be other advantages of consolidating your debts too.
Top Up To Help Your Deposit
One of the largest hurdles for first home buyers is the deposit required.
When you are buying your first home the banks (or the non bank lenders) are always looking for a good sized deposit.
Having some debt is generally accepted, as long as you can afford the mortgage repayments with that debt still being paid too. The banks have specific calculations for this, and some will have a maximum level of debt that they will accept.
In many cases you may be just a small way from having the deposit – a small way short of 10% which is generally the minimum required, or a short way from having a 15% deposit which often means that you qualify for less of a low equity fee or even a small way from having a 20% deposit that is the ideal and with this you get the special interest rates and a cash contribution from the banks.
If you are planning to review or consolidate your debts then it may be a good idea to get a little bit more than needed and to add this to your savings which could help make your deposit look a bit better.
