Home Loan with Debt? Here's How to Get Approved (2026)

Are you dreaming of owning your own home but worried that your existing debt might stand in the way? You're not alone. Many Australians face this challenge as they try to balance debts like credit cards, car loans, or personal loans while aiming to secure a home loan. The good news is that getting a home loan with debt is possible, and understanding the process can help you make informed decisions and take the right steps toward homeownership.

Understanding Home Loans and Debt

When you're carrying debt, it can feel like an additional weight on your shoulders, especially when considering a significant financial commitment like a home loan. Lenders evaluate several factors when deciding whether to approve your home loan application. These include your income, credit history, existing debts, and your ability to repay the loan.

Your debt-to-income ratio (DTI) is a critical factor. This ratio measures your total monthly debt payments against your gross monthly income. A lower DTI ratio indicates that you have a good balance between debt and income, making you a more attractive candidate for a home loan.

Current Home Loan Rates and Requirements in 2026

As of 2026, the Australian home loan market is competitive, with interest rates ranging from 6.49% to 12%. Lenders on Esteb and Co's panel of 83+ lenders offer various products that cater to borrowers with different financial situations, including those with existing debts.

Here are some general eligibility criteria that you might encounter:

• Stable employment history and proof of income.
• A credit score of at least 620, although some lenders might consider lower scores with higher interest rates.
• A DTI ratio below 45% is generally favourable.
• Some savings for a deposit, typically at least 5% to 20% of the property value.

Lender	Interest Rate Range	Special Conditions
Lender A	6.49% - 8.5%	Requires DTI < 40%
Lender B	6.7% - 9.2%	Flexible for lower credit scores
Lender C	7.0% - 10%	Offers debt consolidation options

Steps to Secure a Home Loan with Debt

Securing a home loan when you have existing debt involves careful planning and strategy. Here’s a step-by-step guide to help you navigate the process:

1. Assess Your Financial Situation: Calculate your total debts, monthly obligations, and DTI ratio. Understanding where you stand financially is crucial.
2. Improve Your Credit Score: Pay down debts, make timely payments, and avoid taking on new credit. A higher credit score can improve your loan options.
3. Consult a Mortgage Broker: Speak with a professional at Esteb and Co to explore loan options that fit your financial profile and goals.
4. Build a Savings Buffer: Aim to save for a deposit and additional costs such as stamp duty and legal fees. A larger deposit can improve loan terms.
5. Consider Debt Consolidation: If high-interest debts are a concern, consolidating them into a single, lower-interest payment can improve your DTI ratio.
6. Prepare Documentation: Gather all necessary documents, including proof of income, identification, and details of existing debts.
7. Submit Your Application: Work with your mortgage broker to submit a complete and accurate application to your chosen lenders.

Expert Tips and Considerations

Applying for a home loan with existing debt requires a strategic approach. Here are some expert tips to enhance your chances of approval:

• Be Honest About Your Finances: Transparency with your broker and lender will help tailor a loan solution that works for you.
• Prioritise High-Interest Debt: Pay down high-interest debts first to free up more of your income for mortgage repayments.
• Check for Any Errors in Your Credit Report: Mistakes can impact your credit score negatively. Correct them before applying.
• Stay Within Your Means: Determine a realistic budget for your home purchase to avoid overextending financially.
• Consider Loan Features: Offset accounts, redraw facilities, and flexible repayment options can provide financial breathing room.

Frequently Asked Questions

1. Can I get a home loan if I have unpaid credit card debt?

Yes, it's possible, but lenders will assess your ability to manage mortgage repayments alongside your existing debts. Reducing credit card balances can improve your application.

2. How does a personal loan affect my home loan application?

A personal loan increases your DTI ratio, which might limit your borrowing capacity. Paying down personal loans can enhance your eligibility.

3. What role does my credit score play in obtaining a home loan?

Your credit score reflects your financial reliability. A higher score can qualify you for better interest rates and loan terms.

4. Is it worth consolidating my debt before applying for a home loan?

Consolidating debt can lower your monthly payments and improve your DTI ratio, making you a more attractive borrower.

5. Can a mortgage broker help me get a home loan with debt?

Absolutely. A broker from Esteb and Co can help you navigate the options available across 83+ lenders, tailoring solutions to your situation.

6. How much deposit do I need if I have existing debt?

While it varies, aiming for at least 5% to 20% of the property value is recommended. A higher deposit can lead to better loan conditions.

7. What if I have a default on my credit report?

Defaults can complicate applications, but some lenders may still offer loans with higher interest rates. Addressing defaults before applying is advantageous.