Hello,
I'm just wondering whether banks view certain types of debts in different ways - for example I have a credit card debt of about $3000 and also a tax debt of about $1800. I don't think the total amount of debt is a problem but I am wondering whether the tax debt would be looked at negatively by a lender? The reason I have a tax debt is due to my employer not deducting enough tax last year (I have rectified this problem now so shouldn't receive a tax debt this year). I have entered into a payment arrangement with the ATO and am paying it off in instalments. Would a bank be concerned about the tax debt and if so would I be better off just paying it off on my credit card (which would then mean no tax debt but a higher credit card debt)? Or are they really just looking at the total amount of debt?
Thanks
debts
- Otto Dargan
- Mortgage Specialist
- Posts: 7730
- Joined: Sat Sep 06, 2008 5:55 pm
- Location: Sydney, Australia
- Contact:
Re: debts
Hi Rachel,
Tax debt is not viewed favourably by most lenders. In particular if you are getting a loan to refinance your tax debt then many lenders will outright decline the loan. From a lenders point of view it would be better for you to have more credit card debt and no tax debt.
Tax debt is not viewed favourably by most lenders. In particular if you are getting a loan to refinance your tax debt then many lenders will outright decline the loan. From a lenders point of view it would be better for you to have more credit card debt and no tax debt.
Re: debts
Thanks heaps for your reply. I wouldn't need to refinance in order to pay the tax debt because its only $1800 and I was planning to pay it off in instalments which was agreed to by the ATO. Just curious, do you think the fact that I have a tax debt at all, regardless of the size of it would mean most banks would refuse a home loan application? In that case I will go with your suggestion and pay it off on my credit card before applying. Thanks again and sorry for so many questions, just don't want to risk the home loan being declined.
- Otto Dargan
- Mortgage Specialist
- Posts: 7730
- Joined: Sat Sep 06, 2008 5:55 pm
- Location: Sydney, Australia
- Contact:
Re: debts
It really depends on the lender. I would discuss it with your mortgage broker (are you using us?) before applying and they can work out the best way to present your application to that specific lender. Likely the broker will ask you to repay it from your credit card.