How can I improve my borrowing power?

Any general questions you might have in regards to loans and finance.
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Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: How can I improve my borrowing power?

Post by Otto Dargan »

Hello Birdy. Welcome to the forums.

Before trying to maximise your borrowing capacity, you should get an estimate of how much you’re allowed to borrow. You can use our borrowing power calculator to get an estimate of the amount that you may be able to borrow to buy property.

The calculator takes into account many things that the banks and lenders consider, thus making for a fairly accurate result. The borrowing power is usually calculated by the formula: Gross income – tax – existing commitments – new commitments – living expenses – buffer = monthly surplus.
But please keep in mind that it should only be used as a guide.

Here are a few things that you guys can do to maximise your borrowing power:
  • Choose the right lender for you, one that allows you guys borrow more.
  • Find out which lenders can include overtime, bonus and other income in their assessment.
  • Cancel your credit cards or at least decrease their limit.
  • Switch any current loans that you may have to interest only. This is acceptable to some lenders.
  • If you’ve got any current loans, fix their rate. However, only a few lenders may accept this.
It’s recommended that you only go ahead with this if you’ve got a regularly increasing income and if you’re just at the beginning of your career.

You can enquire online or give us a call on 1300 889 743.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

User avatar
Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: How can I improve my borrowing power?

Post by Otto Dargan »

Hi Birdy,

The difference is due to the reason that each bank assesses your borrowing capacity in a different way. The major discrepancy is due to the following reason in your borrowing capacity.
  • Credit Cards: Most lenders will assess your credit cards as being fully drawn, even when they are not. They will then use between 2% and 3% of the credit limit as a monthly repayment in their assessment.
  • Personal Loans: Most lenders will use the actual personal loan repayments while some use a higher assessment rate.
  • Existing Mortgages: Some lenders use the actual repayments for your loans whereas some add a buffer in the actual rate.
  • Rent-free with parents: Some lenders allow for $150 per week as a rent expense in case you need to move out of home. With most lenders, living rent-free with parents will have no effect.
To find out which lenders can give you the higher amount to borrow, please contact one of our mortgage brokers by filling in our free assessment form or by calling us on 1300 889 743.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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