How You Can Increase Your Borrowing Power

Your dreams of living in a perfect home can be curtailed if you do not have sufficient funds. Lenders and banks do not grant a loan  easily. Therefore,  increasing your borrowing power could make a difference between buying your dream house and losing it due to improper planning.
So, how do you increase your buying power and get that dream house of yours? Here are a number of ways to maximise your borrowing power.


1. Pay off Debts

Lenders look at your debts when assessing your mortgage application. The more debt you have, the less likely you will be able to borrow. Use your savings to pay off any existing debts as it will have a major impact on the success of your loan application.


2. Minimise Available Credit

Credit cards can have an unfavourable impact on borrowing power. For example, if you have two credit cards and both have $2,500 limits on them, the limits on the cards will lower your borrowing power. The reason is that for banks these limits are debts.

So, if you do not use your credit cards or have more limits on them, you must lower the limit or remove excess cards to improve your borrowing power.


3. Tax Returns are Important

If you have your tax returns up to date, banks will be able to evaluate your previous records and analyse your income to be steady which can help to boost your borrowing power.


4. Opt for a Lender that considers Negative gearing and rental income

Not all banks and lenders consider negative gearing for your investment property.  Few banks don’t consider negative gearing at all. On the other hand, some lenders take into count 80% of the rental income that you’re expected to receive and servicing is also done at the loaded rate.


5. Look Around for Low Interest Rate

Interest rates vary from lender to lender, so look for loans with a lower interest rate or contact a mortgage broker to help you find one.

Savings on annual interest rate will leave you with a lot of money which you can use for paying the loan.


6. Choosing the Right Loan Product

Many people may not think about it but loan products offered by a bank or a lender can improve your borrowing power.

There are different features such as the honeymoon period which offers low interest for the initial period of the loan (usually one year). There are many different kinds of loan and you will be assessed differently for each loan, so it is wise to choose the one that will provide you the maximum borrowing power.


7. Save a Large Deposit

Saving a large deposit will increase your borrowing power. If you only have a 5% deposit, you’ll be required to pay lender’s mortgage insurance. A deposit of 20% will put you in a very good position and the lender’s mortgage insurance will also not be required. So, the more you save, the better it is.


8. Roll your debts into your mortgage

Unsecured debts such as personal loans and credit cards have expensive monthly repayments, and these monthly repayments cut into the amount you can repay on a mortgage.


9. Take a long loan

While 25-year mortgages have been the norm, that’s changing to 40 years in some cases. A longer loan cuts your repayments, but increases the total interest you will pay over the life of the loan.


These techniques can help you boost your borrowing power but you may still face problems in other aspects of your home loan application. Josh Financial Services can help you get rid of those problems as our experts can make the process of securing a mortgage application simple and straightforward for you.


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