All Topics / Finance / Applying for mortgage with Credit Card

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  • Profile photo of ediot123ediot123
    Participant
    @ediot123
    Join Date: 2007
    Post Count: 54

    Hello Guys, Just wondering what would having a balance owing on your credit card do to your credit rating if going for a mortgage. Say a $2000 credit card owing for a few months. Also what effects would this have when applying for a loan. Pro (if any) and cons would this create. Thank you

    Profile photo of Matt McLeanMatt McLean
    Participant
    @matt-mclean
    Join Date: 2008
    Post Count: 54

    Hi Ediot,

    A $2,000 credit card would not have a huge bearing on your Home Loan application as it only equates to about $50 in monthly repayments. The key thing to remember is that the Bank will assess this debt on the LIMIT of the card not the balance. Having said that, it always looks better to the Bank if your balance is normally well below the limit.

    On the other hand, if servicing (available income to service debts) is tight – that small credit card could make all the difference! It does depend on each individual case, but normally a small credit card like that would not make much of an impact to the application.

    Hope this helps. Good luck.

    Kind Regards,

    Matt.

    Profile photo of ediot123ediot123
    Participant
    @ediot123
    Join Date: 2007
    Post Count: 54

    That's great information Matt. Thanks for your help on this.

    Profile photo of thecrestthecrest
    Participant
    @thecrest
    Join Date: 2004
    Post Count: 992

    You could always ask the Lending Bank if you could switch to a lower limit card with them, if you have available credit you don't use each month, so they don't unnecessarily limit your borrowing.
    cheers
    thecrest

    thecrest | Tony Neale - Statewide Motel Brokers
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    Profile photo of number 8number 8
    Participant
    @number-8
    Join Date: 2010
    Post Count: 333

    I purchased my third property on a credit card,

    You must assess your own situation carefully….

    I bought a $200K property that is now worth $435K, The interest repayments on the card were minimal compared to the outcome, and this did not have a significant bearing on serviceability (you must have this calculated).

    The key to any property investment is getting the loan, if you cannot borrow the money, then you have to be creative…..

    http://www.birchcorp.com.au

    Profile photo of ediot123ediot123
    Participant
    @ediot123
    Join Date: 2007
    Post Count: 54

    Thanks Number 8. Sounds like you did real well on that purchase. So what you are saying is you actually opened up a credit card account and used it as a deposit for your third IP?

    Was the interest lower on your CC than it was on the mortgage?

    Or am I missing something?

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,018

    Think #8 is referring to how you can obtain the deposit.

    It is unlikely that the credit card rate will be less than a standard mortgage rate however if you cant raise the deposit then a higher rate on a small loan is neither here nor there if you think there will be capital growth on the property.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
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    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of ediot123ediot123
    Participant
    @ediot123
    Join Date: 2007
    Post Count: 54

    Apart from having more for the initial deposit, what other advantages would taking a personal loan out before applying for a mortgate create.

    Also what disadvantages? – I know there is probably more cons than there are pros in this case.

    Would love to hear your opinions

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