The common mortgage mistake that many Australians are making

A mortgage expert has revealed the one simple reason many Aussies are being rejected for a home loan and shared some simple tips to help you get approved.

Andrew Campbell, a house and land specialist based in Perth, warned wannabe homeowners to think twice before splashing any money on a new car.

Mr Campbell said taking out a $15,000 car or personal loan can reduce a person’s home loan borrowing capacity by an eye-watering $100,000.

He said a man in his 20s was left bitterly disappointed after he applied for a home loan soon after borrowing money to purchase a new Ford Ranger ute.

Mr Campbell said his borrowing capacity plummeted from $600k to about $200k because the vehicle is a depreciating asset and requires high-interest repayments.

He told Daily Mail Australia that in the eyes of the bank, these higher repayments meant the applicant had less surplus cash to repay the home loan.

‘I spoke to a young bloke the other day earning $112,000 a year. Single guy, no other commitments.

And I’m thinking, no problem, this guy could borrow about $600,000 for his first home,’ Mr Campbell explained.

‘And then he proceeded to tell me that he had just taken out a brand new car loan of $80,000 for a Ford Ranger.

‘So his borrowing capacity went from about $600,000 to about $200,000 or probably less.

‘If you’re thinking of buying a new car, look at getting into your own home first, because it’s very easy to go and get a new car loan later, once you’ve established your home loan repayment and you’re comfortable with them.

‘Then you can work out what you can repay on a car loan.’

Mr Campbell said if first-time buyers bought a car before they secured a home loan, it could ‘drastically’ decrease their borrowing capacity.

He said banks would consider all debts before approving a home loan, which could, in turn reduce the number of homes available to the applicant.

‘You can have some debts, but it’s going to hinder your borrowing capacity,’ he said.

Mr Campbell said people looking to enter the property market should ensure they don’t have any unpaid bills and good credit.

‘It’s also good to remember, when buying your first home, it’s not your forever home. Make sure it’s something you can afford and don’t go overboard by adding flashy add-ons like floor-to-ceiling tiling or high ceilings,’ he said.

Mr Campbell (pictured with a client in April) said if first time buyers bought a car before they secured a home loan, it would ‘drastically’ decrease their borrowing capacity

A developer has urged first time buyers to secure a home loan before purchasing a new car (pictured is a Ford Ranger, one of Australia’s top selling 4WDs)

He encouraged first time buyers to keep a ‘clean plate’ by not going into overdrafts on any of their bank accounts and keeping a stable income. 

Mr Campbell said the majority of his clients were young Australians in their 20s and 30s who were keen to leave renting behind. 

‘They’re paying a high rent, so they might as well pay a high mortgage,’ he said. 

‘It’s a better financial decision to buy a house than a car.’