How to use your 13th cheque to get onto the property ladder

Article summary

• Your 13th cheque can be used to help you make a solid long-term investment rather than be squandered on short-term pleasures.
• For example, you can use it as a deposit or an extra payment into a home loan.
• You can also use it to settle debts, making homeownership more affordable and home loan approval more likely.

Tempting as it may be to let an annual bonus slip slowly – or quickly in some cases – through your fingers on a big-screen TV or exotic family vacation, it’s far wiser to invest in property and reap the long-term benefits of a sound investment.

You can use our Bond Calculator to determine what home loan you’ll qualify for based on your income, and factor your 13th cheque into the monthly repayments.

How to use the 13th cheque

Here are some ways a 13th cheque can help you secure a property or take you some way to paying off a home loan on one you already have.

1. Use it as a deposit

When you purchase a property, you pay a certain amount upfront (usually 10% minimum). This is known as the deposit.

The deposit improves your chances of getting home loan approval, especially if you put in over 10%. A larger deposit will also earn you more favourable interest rates on your home loan.

So consider putting your 13th cheque toward your deposit. Use our Bond Repayment Calculator to determine how much you’ll pay back per month on a bond dependent on your deposit.

2. Use it as an extra repayment

If you’re already paying off a home loan, consider using your 13th cheque as an extra payment, reducing your bond term, monthly repayments, and interest rates.

You can use our Extra Payments Calculator to determine how this extra payment will impact your home loan.

3. Improve your credit record by paying off debts

Your credit record is the most important factor determining whether or not you will obtain approval for a home loan.

You need a credit score of at least 610 for the bank to consider your home loan application, while anything above 661 is considered a decent credit score.

Here’s a more detailed breakdown:

• 781 to 850. Excellent.
• 661 to 780. Good.
• 610 to 660. Fair.
• 500 to 610. Poor.
• 300 to 499. Very poor.

If you fear your credit score is too low, you can take measures to improve it, for example by paying off debt and outstanding bills.

Consider using your 13th cheque to settle debts. Improvements on your credit record will usually start showing up in around three months.

Find out what home loan you’ll qualify for

Before factoring your 13th cheque into your budget, it helps to know what home loan you qualify for.

Getting prequalified with ooba Home Loans provides you with proof that you qualify for a home loan, along with the size of the home loan you’ll qualify for, so you can house hunt within your means.

It also determines your credit record, so you can decide whether you want to try paying off debts to improve your credit record before applying.

You can get prequalified by contacting an expert at ooba Home Loans or by using our free, online prequalification tool, the Bond Indicator.