Fri. Apr 19th, 2024
alert-–-one-simple-thing-stood-between-me-and-a-mortgage-to-buy-a-house-at-25-–-and-you-won’t-believe-the-impact-it-can-have-on-your-credit-scoreAlert – One simple thing stood between me and a mortgage to buy a house at 25 – and you won’t believe the impact it can have on your credit score

A woman who bought a house at 25 has revealed she was able to qualify for a home loan by cancelling her Afterpay account.

Bridget Carkeet, now 28, bought a four-bedroom house in Ipswich, 40km south-west of Brisbane, for $500,000 in 2021.

But to qualify for the loan, she had to close down her Afterpay and Zip Pay accounts.

‘They were not really in use but I still had them active,’ she told Daily Mail .

Experts warn a credit card with a $15,000 limit – even if it has nothing outstanding – could cut your potential maximum available loan by $71,000 if it’s not cancelled.

By closing down both accounts, Ms Carkeet was given the green light for her mortgage and even allowed to borrow another $2,000 from the bank. 

And as a result, Ms Carkeet was able to buy a house on her own at Karalee, a 15-minute drive from work at a private allied health practice near Ipswich Hospital.

‘The advice that was given to me by my banker was to try and make sure that my lending capacity was at the best it could be,’ she said. 

A woman who bought a house at 25 has revealed she was able to qualify for a home loan by cancelling her Afterpay account

A woman who bought a house at 25 has revealed she was able to qualify for a home loan by cancelling her Afterpay account

As a clinical exercise physiologist who helps children regain or enhance their mobility, she was able to get a loan with a 10 per cent deposit, and spared from lenders’ mortgage insurance because she is a health professional.

BORROWING TIPS

 

1. Pay off credit card, Afterpay debts

2. Know credit score

3. Buy with family 

Her clients are children who qualify for the National Disability Insurance Scheme, ranging in age from one to 17 who have suffered a brain tumour, have cerebral palsy or other mobility challenges.

‘I just followed my own passion in that healthcare field – I didn’t necessarily decide based on what jobs are available,’ she said.

‘I went with what I enjoyed, making an impact on their abilities to care for themselves and to progress into normal schooling.’ 

She was able to borrow $450,000 when Reserve Bank interest rates were still at a record-low of 0.1 per cent and banks offered fixed mortgage rates starting in the two per cent range.

‘The interest rates were quite low and it was a similar amount for me to be renting,’ she said.

‘I tried to get in as soon as I had the savings and as soon as I had a secure, permanent, full-time job.’ 

Since then, interest rates have risen 13 times to a 12-year high of 4.35 per cent, pushing variable mortgage rates into the six-plus per cent range.

Despite earning a six-figure salary, Ms Carkeet still goes without a credit card and limits her TV streaming to just Netflix.

She also packs her lunch to take to work each day and only eats out at a restaurant once a week with her boyfriend Aidan Lunney, a physiotherapist work colleague.

Bridget Carkeet, now 28, bought a four-bedroom house at Ipswich, Queensland for $500,000 in 2021 (she is pictured right with her boyfriend Aidan Lunney)

Bridget Carkeet, now 28, bought a four-bedroom house at Ipswich, Queensland for $500,000 in 2021 (she is pictured right with her boyfriend Aidan Lunney)

‘It wasn’t like super easy just making adjustments here and there, eating out a little bit less, budgeting properly,’ she said.

‘We’ve just made some adjustments to our lifestyle. 

‘We made sure that we did our monthly budget and try to stick with that.’  

To find the right house, Ms Carkeet spent a year looking and settled for a cheaper home in a suburb where the median house price is now $966,536, following a 14 per cent increase during the past year.

‘I was quite patient with where I bought and what I bought,’ she said.

‘Your first house, I didn’t go and try and buy the most flashy house and I didn’t try and buy at the upper limit of my lending amount.’

As a new borrower, she also expected interest rates to rise, despite former Reserve Bank governor Philip Lowe in 2021 suggesting rates would stay on hold until 2024 ‘at the earliest’.

‘I didn’t believe it at all,’ she said. 

‘I just tried to think about the worse-case scenario and what the previous interest rates had been.’ 

Compare the Market economic director David Koch said potential borrowers often had the misconception the borrowing amount would only fall by the credit card limit (he is pictured with his wife Libby)

Compare the Market economic director David Koch said potential borrowers often had the misconception the borrowing amount would only fall by the credit card limit (he is pictured with his wife Libby)

How credit card limit your borrow

ZERO CREDIT CARD: Maximum borrowing $540,000 

$2,000 CREDIT CARD LIMIT: Maximum borrowing limit of $530,000

$10,000 CREDIT CARD LIMIT: Maximum borrowing limit of $493,000

$15,000 CREDIT CARD LIMIT: Maximum borrowing limit of $469,000

Compare the Market calculated that an average-income earner on $98,218 with a $2,000 credit card limit can only borrow $530,000 but without a credit card, this jumped by $10,000 to $540,000.

A $10,000 credit card limit reduced the potential borrowing capacity by $47,000 to $493,000. 

A $15,000 credit card limit reduced the maximum borrowing by $71,000 to $469,000. 

Compare the Market economic director David Koch said potential borrowers often had the misconception their maximum borrowing amount would only fall by the credit card limit.

‘There’s a misconception that the bank will just simply subtract the credit card limit amount from your borrowing power – but that’s not true,’ he told Daily Mail .

‘Credit cards can reduce people’s borrowing power by $50,000 or more.

‘If you don’t want to cut up your credit card, you could consider lowering your limit.’