Improve Your Borrowing Capacity

It's not that lenders have tightened their purses when it comes to lending you money for your home or investment property, it's more a matter of interest rates and higher living costs eroding what they actually can lend you. The banks are still in the business of lending money, and want to give as much out as possible to what they deem good prospects. With what is being called a "housing affordability crisis" (media, not me), there are ways to showcase your credit worthiness in-order to borrow the maximum needed to get your desired home. Let's have a look at a few of them in turn:

• Start Reducing your Credit-Card Limits (or cancel them entirely): Even if you're not using them, lenders count these limits as potential debt. They will use the limit for your servicing calculation, not just what is owed. So if you have a $20,000 limit, a bank would assume a monthly expense of around $760 (even if it always has a zero balance).
• Pay off personal loans: this includes car loans or Afterpay etc. This decreases your liabilities and boosts your borrowing potential. You can always consolidate these debts over 30 years into your new home loan, which will greatly improve your borrowing capacity. You will probably pay more interest on these loans as a result, though. So if you do add personal loans to your home loan, try to continue paying this debt as if it's still over a 5 year term.
• Cut your monthly spending: Lenders assess your expenses through a standard measure called HEM's. Cutting your spending will greatly enhance your borrowing power. Stop going out so much, no more TAB on your bank card, slow restaurants and your entertainment expenses. Limit your trips away in the months coming up to your loan application.
• Use the longest loan term possible: Extend your loan term to 30 or 35 years. One lender does 40 years. This will reduce your monthly repayments and give you the opportunity to borrow more moeny.
• Utilise Interest Only Repayments: By doing this, you're monthly repayments will be smaller for the first few years. However this will mean you don't put any dents in your principal at first, however it may mean you can qualify for the loan amount you need.
• Lender selection is important: I wouldn't say it's the most important, but it definitely helps. Some lenders, like Liberty Financial, are simply more aggressive at lending money, so if you need a higher borrowing capacity try a non-bank lender. Also look for lender specials and LMI discount offers.
• Consolidate consumer debt: consolidate personal loans, car loans, credit card balances into your 30 year home loan term greatly improves your borrowing capacity. Have a broker show you in black-and-white.
• Keep you credit report clear: A good credit report gives you more lender options. Ask your broker for a referral to a credit clear company if there are blemishes making it hard for you to get a home loan. It costs roughly $1,500 however you may save this 10 times over in a lower interest rate over the life of the loan.

Are you looking to know what your borrowing capacity is? Get in touch and we'd be happy to help.

Loan Market Matthew Stack - 0423 237 242

https://broker.loanmarket.com.au/matthew-stack/

#mortgagebroker #borrowingcapacity #mortaggebrokermilperra