Home Loan with Credit Card Debt? Discover Hope (2026)

You're dreaming of owning your own home, but there's a nagging concern that's holding you back—your credit card debt. In an era where home ownership remains a quintessential goal for many Australians, understanding how existing debts impact your ability to secure a home loan is crucial. Let's explore if you can still get a home loan while managing credit card debt and what steps you can take to improve your chances.

Understanding Home Loans and Credit Card Debt

Before diving into the specifics, it's important to understand the relationship between home loans and credit card debt. When you apply for a home loan, lenders assess your financial situation to determine your creditworthiness. This assessment includes evaluating your income, expenses, and current debts, including any credit card balances. Lenders are concerned with your ability to service the loan, which is why your debt-to-income ratio plays a significant role in their decision-making process.

Home Loan Rates, Requirements, and Options in 2026

In 2026, the Australian home loan market offers a variety of options, and understanding these can help you make informed decisions, even if you're managing credit card debt.

Interest rates for home loans typically range from 6.49% to 12%, depending on the type of loan, the lender, and your financial profile. Fixed rates might be slightly higher, offering predictability, whereas variable rates can fluctuate, potentially offering lower initial rates but with the risk of increases over time.

Eligibility criteria vary among lenders, but generally include:

• Proof of stable income
• A deposit of at least 5-20% of the property value
• A good credit score (typically 620 or above)
• Manageable existing debt levels

Let's consider some options for borrowers with credit card debt:

Loan Type	Interest Rate Range	Suitable For
Fixed-Rate Home Loan	6.49% - 9%	Those seeking stability
Variable-Rate Home Loan	6.7% - 11%	Those open to market fluctuations
Low-Doc Home Loan	8% - 12%	Self-employed or irregular income

With over 83 lenders on our panel, Esteb and Co can help you navigate these options and find a lender that suits your unique circumstances.

Steps to Secure a Home Loan with Credit Card Debt

While having credit card debt can complicate your home loan application, it's not a deal-breaker. Follow these steps to improve your chances:

1. Assess Your Financial Situation: Calculate your total debt and monthly repayments. Understand your debt-to-income ratio.
2. Create a Debt Reduction Plan: Focus on paying down your credit card balance. Consider transferring balances to a lower-interest card or consolidating debts.
3. Enhance Your Credit Score: Make timely payments and avoid new debts. Check your credit report for errors and rectify them promptly.
4. Build Up a Larger Deposit: The bigger your deposit, the less risk for the lender. Aim for at least 20% to avoid Lenders Mortgage Insurance (LMI).
5. Consult a Mortgage Broker: Work with professionals like Esteb and Co to find a lender that fits your profile.

Tips and Considerations

Here are some expert tips to keep in mind:

• Be Transparent: Lenders appreciate honesty. Disclose all financial details to avoid complications later.
• Consider a Co-signer: A co-signer with a strong credit profile can improve your application.
• Negotiate with Creditors: Sometimes creditors are willing to negotiate debt terms if it means you can become a more stable borrower.
• Practise Financial Prudence: Avoid taking on new debts and minimise discretionary spending.
• Stay Informed: Keep abreast of market changes and how they might affect interest rates.

Frequently Asked Questions

1. Can I apply for a home loan if I have maxed out my credit card?

It's possible, but difficult. Lenders will look unfavourably on maxed-out credit cards as they indicate financial strain. It's advisable to lower your credit card balances before applying.

2. How much credit card debt is too much when applying for a home loan?

While there's no set amount, a debt-to-income ratio above 30% generally raises red flags. Aim to lower your ratio by paying off debts and increasing your income.

3. Will consolidating my debt help me get a home loan?

Debt consolidation can simplify your repayments and potentially lower your interest rates, making you more appealing to lenders.

4. Can Esteb and Co help me if my credit score is low due to credit card debt?

Yes, with access to over 83 lenders, Esteb and Co can help you find options suited to your financial situation, even if your credit score isn't perfect.

5. Is it better to pay off my credit card debt before applying for a home loan?

Paying off credit card debt before applying can improve your credit score and debt-to-income ratio, which are crucial factors in securing a home loan.

6. Can I get a home loan if I only pay the minimum on my credit cards?

Paying only the minimum can signal financial instability to lenders. It's advisable to pay more than the minimum to reduce your debt quicker.

7. What impact does closing a credit card have on my home loan application?

Closing a credit card can affect your credit score by reducing your available credit, but it also reduces your potential debt load. Weigh the benefits carefully.