Believe it or not, I’m still getting a lot of enquiry from first home buyers who are keen to get approvals in place. However, almost all of these buyers have some sort of consumer debt. Whether it be a car loan, maxed out credit card, overdraft, interest free HP or even Afterpay – almost every first home buyer applicant has at some point decided taking on debt was the way to pay for a depreciating asset.
It’s no problem though, we’ve all been there – me included. When I finished school 12 years ago and got a full-time job at the bank the first thing I did was borrow $12,000 to buy a boy racer Toyota Altezza - lowered with gold rims…… to this day one of the worst financial decisions I’ve made!
The great news is, that now is actually a pretty good time to be paying down some of those debts. If your income hasn’t been affected significantly by Covid-19 then chances are you’ve got a bit more surplus. Those almond milk lattes or lunches you buy on a daily basis, the online shopping that can no longer be delivered, or dinners out a couple of nights a week. It all adds up and right now, you’re not spending it.
Level 4 still has at least another week to run (probably more) and then level 3 will in my opinion run through most of Winter so with that in mind, your ability to go out and spend money is limited. So why not focus on clearing some debt and getting ‘bank fit’. Set up a separate account and each day move the amount of money that you would usually have spent on things you now can’t buy. This will do a couple of things. It’ll put away some savings which you can use to clear debts and it will also show you how much you money you spend that you don’t need to. If one of the positives that come out of this time is better financial habits then that’s a big tick in my opinion.
In a recent survey out to bankers and financers around the country, the overwhelming consensus was that banks have largely shut the door to new business and are focusing on existing clients. In particular those experiencing distress. So, getting an approval in place right now is difficult – not impossible, but difficult. Borrowers need to be in as strong of a position as possible and that means having minimal consumer debts and good account conduct. The really positive news is I’m still seeing buyers eager to get a purchase underway – both first home buyers and investors. So, my comment on that is to keep the positivity going! Use this time wisely and focus on giving yourself the best possible chance of approval.