Mortgage with Loan? Discover Approval Secrets (2026)

Are you wondering whether your existing debts might stand in the way of securing a mortgage? You're not alone. Many Australians find themselves in a similar predicament, balancing personal loans, credit card debts, and the dream of homeownership. The good news is that having a loan doesn't necessarily disqualify you from getting a mortgage. Let's explore how you can navigate this process successfully.

Understanding Mortgages and Existing Loans

When applying for a mortgage, lenders assess your financial situation comprehensively. This includes looking at any existing debts you may have. A key metric that lenders use is the debt-to-income (DTI) ratio, which compares your total monthly debt payments to your monthly income. A high DTI ratio can be a red flag for lenders, as it indicates that a significant portion of your income is already committed to debt repayment, potentially limiting your ability to manage additional mortgage payments.

However, having an existing loan doesn’t automatically exclude you from qualifying for a mortgage. Factors like your credit score, income stability, and the nature of your existing loan all play crucial roles. Understanding how these elements interact can empower you to take strategic steps toward mortgage approval.

Current Market Rates and Requirements

As of 2026, the Australian mortgage market offers a range of interest rates depending on factors like loan type, lender, and your personal financial profile. Current variable rates fluctuate between 6.49% and 8.75%, while fixed rates may range from 7.00% to 9.50%. It's vital to shop around and compare different lenders to find the best deal.

In terms of requirements, most lenders consider the following:

• Credit Score: A score above 620 is generally favourable, though higher scores can secure better rates.
• Deposit: A minimum deposit of 5% is typically required, though 20% is ideal to avoid Lender’s Mortgage Insurance (LMI).
• Stable Income: Demonstrating a steady income stream over the past two years is advantageous.
• DTI Ratio: Lenders typically prefer a DTI ratio of 36% or lower, but some may accept higher ratios depending on other factors.

Here's a comparison of key elements to consider:

Steps to Secure a Mortgage with an Existing Loan

Securing a mortgage while managing existing debts involves careful planning and a strategic approach. Here’s a step-by-step guide to help you through:

1. Review Your Financial Health: Assess your current debts, income, and expenses. Calculate your DTI ratio to understand your standing from a lender's perspective.
2. Improve Your Credit Score: Pay down existing debts where possible. Timely payments and reducing credit card balances can significantly improve your score.
3. Increase Your Deposit: Saving for a larger deposit can strengthen your application and reduce LMI costs. Consider setting up a dedicated savings account.
4. Consult a Mortgage Broker: Engage with a broker from Esteb and Co, who has access to an extensive panel of 83+ lenders. They can provide tailored advice and help you find a lender that aligns with your profile.
5. Prepare Documentation: Gather necessary documents such as pay slips, tax returns, and details of any existing loans. Having these ready will streamline the application process.
6. Apply for Pre-Approval: Getting pre-approved with a lender gives you a clearer picture of how much you can borrow and demonstrates to sellers that you are a serious buyer.

Expert Tips and Considerations

Here are some expert tips to consider when applying for a mortgage with existing loans:

• Prioritise Debt Reduction: Focus on paying down high-interest debts first. This can improve your DTI ratio and free up more of your income.
• Avoid New Debts: Refrain from taking on additional loans or credit lines during the mortgage application process, as this can affect your credit score and DTI ratio.
• Consider a Co-Borrower: If possible, applying with a co-borrower can enhance your application by combining income and improving creditworthiness.
• Be Transparent with Lenders: Full disclosure of your financial situation allows lenders to offer the most suitable loan options.
• Stay Informed: Regularly check interest rate trends and lender offers to ensure you’re getting the best deal available.

Frequently Asked Questions

Here are some common questions prospective homebuyers have about getting a mortgage with existing loans:

• Can I still get a mortgage if I have a personal loan? Yes, having a personal loan doesn’t automatically disqualify you from getting a mortgage. Lenders will consider your overall financial health, including your DTI ratio and credit score.
• How can I improve my chances of mortgage approval? Reducing existing debts, improving your credit score, saving for a larger deposit, and consulting with a mortgage broker can all enhance your application.
• What if my DTI ratio is high? Focus on paying down debts, increasing your income, or considering a co-borrower to lower your DTI ratio.
• Is it better to pay off existing loans before applying? While reducing debt can improve your application, it’s important to balance this with maintaining enough savings for a deposit.
• How does a mortgage broker help? A broker, like those at Esteb and Co, can guide you through the process, help you understand your options, and connect you with lenders suited to your financial profile.