How a daily cuppa is hurting your chances of getting a home loan

May 23rd, 2019

 

Put the cup down. There’s a higher price to pay for that takeaway coffee than just forgetting your KeepCup.

Fallout from the banking royal commission has seen living expenses come under more scrutiny than ever as the big banks commit to more responsible lending. This means when you apply for a loan, your bank or credit union is going to be looking at everything from your bills to your morning coffee.

Where and when you’re spending your money is a good indicator to banks of if you’re living within or outside your means – and if daily debits like coffees will continue to occur in future.

Whether you’d adjust your spending habits after taking on debt doesn’t matter. Most lenders will look closely at your previous three months of spending when you apply for a loan – so, those coffees on the way to work, Afterpay debits, and even Friday night UberEats deliveries will add up.

How to improve your chances of getting a bank loan:

  • Do your research, talk to someone who has borrowed money before, and shop around for the best deal. You can never be overeducated when making a decision this big.
  • Keep an eye on any buy-now-pay-later services you are using, as they are seen as credit liabilities. Pay off any Afterpay or ZipPay debts and cancel accounts.
  • Reduce the limits on your credit cards or cancel all together if possible. Lenders will assume you could draw the maximum amount you have on that card at any moment, regardless of whether you ever have or not.
  • Watch your spending in the three months leading up to applying for a loan.
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